Well, ethics of SysAdmin say that you should respect users' privacy by only using those logs for troubleshooting purposes, and that discussing their surfing habits and destinations is a big no-no. Even just satisfying a personal curiosity about a user's surfing habits is invading their privacy even if you don't discuss it with anyone else. Discussion about surfing habits with Management should be kept to a statistical nature too.

I guess that you perhaps need to make this clear - That you really don't care what they look at within the bounds of what the company policy allows them to view.

You should also point out that the proxy server protects them (ie, their jobs) too, by reducing the chances that they accidentally hit an unscrupulous site that automatially pops up 20 porn ads - and encourage them to report anything that does incorrectly get through. Management would have a tough time firing someone for porn-browsing when the proxy is supposed to eliminate it.