Realize that you have to go to the Privoxy configuration file to enable listening on port 8118 for one or more of your network adapters. Just downloading and running it is insufficient. I haven't used Privoxy in a while, but I believe it’s either not bound to any adapter at first, or if it is, it's only the localhost (127.0.0.1). So if Privoxy is running on a different machine from Vidalia, you'll need to add that IP address to the listen-address parameter in the Main Configuration file. Also, whether you’re running it locally or remotely, make sure you open the 8118 port on your firewall.