I am unsure about proxy.pac as I have not heard about this, so maybe ignore my answer. It should be checking your hosts file before anything else, it is possible that a old entry is cached. Close Internet Explorer, Go to a (elevated on Vista/7) command prompt and type ipconfig /flushdns and restart IE. Test it now, if it still does not work because of a proxy file, (again, I have little experience here), try adding it to the exceptions in the proxy list. As your are pinging the correct IP, I think it is just a cache issue as I have sometimes had the same thing after just adding a entry. A restart for me usually does the trick.
Proxy Auto-Configuration Script to Bypass Proxy for Local Addresses. Most organizations will want to bypass their proxy server for local web servers (intranet, CMS, helpdesk, etc).