Yes but do they only reference the movie strip inside, not any effect you may have applied on top? Effectively they are only a proxy for the source material not the meta strip?
Hmm, just tried it and I cant get Blender to generate the proxy files.
It appears to work if the contents or source strip is also proxied. But all you are seeing is that file’s proxy.
3pointEdit,
For me, the Proxy on the Meta-Strip does indeed include ALL the elements of the Meta-strip.
You said that, for you, the original, pre-Meta files have to be Proxied already to generate the Proxie Image Sequence. For me, this is not the case. I simply select the directory, and it automatically creates a sub-folder and places the Image Sequence inside that new folder.
What is in your meta strip? Perhaps I have the wrong media type?
What version Blender are you using?
Just after you said that, I just did a quick one to let you know the results.
The Meta-strip contained:
-A small .AVI file
-A black “Color Effect”
-A Cross (dissolve) Effect between the black and the .AVI
It produced an Image Sequence.
Hmm, cant get that to work at all. Which release are you using? Any chance you could post the simple blend file, even without the media to test?
Okay, here’s a .Blend with three seconds of very crude Star Wars footage and the Effects joined in a Meta-strip.
Temp.blend (414 KB)
Thanks David, its bed time here. I will have a look tomorrow. Very interested to see whats up.
Drats, no media. No test.
EDIT:
OK I just substituted your file for another .AVI
Now the Meta strip will render a proxy =) . However I can’t get the proxy to appear for playback. Just black. 
Thanks anyway David
Well this is odd.
.avi files will build a proxy
.mov files will build a proxy
Both play back in proxy mode
.avi in a meta strip will build a proxy
.mov in a meta strip will NOT build a proxy
Meta strip proxies will NOT play back (just black).
Bug tracker?
EDIT:
Ok I have submitted a variation of the bug. I didn’t append it to yours David as I think that it may be a different effect. I could not get the dead proxy to appear after rebooting Blender.
http://lists.blender.org/pipermail/bf-blender-cvs/2012-February/043372.html
Yay Sergey fixed it all ready.
Thanks for your interest and persistence on this, 3PointEdit. We all gain from the work that everybody puts in. (And thanks to Sergey, too, of course.)