What steps will reproduce the problem?
1. Run the script from a python script
2.
3.

What is the expected output? What do you see instead?
You are in a infinite loop ! 
If for workaround, you try to launch it into a thread; it's not a good idea 
because in pyhon you can't easily to force the stop it

In my script, I expecte:
- to launch the proxy and continue the script.
- to stop it

What version of the product are you using? On what operating system?
version: '0.1.0 Draft 1'
OS: Windows 7

Please provide any additional information below.

I propose you encapsulate the start/stop in a class:

See below (file in attachment), this example don't take into account the IPV6 
and timeout

class ConnectionHandler(SocketServer.BaseRequestHandler):

    #Instead of __init__
    def handle(self):
        self.client = self.request
    ....

class WebProxy:
    def __init__(self):
        self.server = None


    def start(self, host='localhost', port=8080, IPv6=False, timeout=60,
                      handler=ConnectionHandler):

        print "Start proxy server"
        #For the moment  only in IPV4
        # if IPv6==True:
            # For IPV6, override SocketServer.ThreadingTCPServer
            # soc_type=socket.AF_INET6
        # else:
            # soc_type=socket.AF_INET

        self.server = SocketServer.ThreadingTCPServer((host, port), handler)

        # Start a thread with the server -- that thread will then start one
        # more thread for each request
        server_thread = threading.Thread(target=self.server.serve_forever)
        # Exit the server thread when the main thread terminates
        server_thread.daemon = True
        server_thread.start()

    def stop(self):
        if self.server is not None:
            print "Stop proxy server"
            self.server.shutdown()