How do I get Fiddler to stop ignoring traffic to localhost?

Question

When using Fiddler to monitor HTTP Requests & Responses in Internet Explorer it ignores all traffic directed to http://localhost.

Answer 1

Windows XP:

Be sure to set to click the settings button for each of the items in the "Dial-up and Virtual Private Network settings" listbox in the "Connections" tab of the "Internet Options" control panel applet.

I noticed that Fiddler would stop using the "LAN settings" configuration once I connected to my VPN. Even if the traffic wasn't going through the VPN.