What script/software do you recommend for starting a proxy site? Once the site is up, what's the best way to attract traffic to it? And the best way to monetize it? Adsense? Finally, what are the legal implications? If a user does bad stuff through your proxy, can you be held liable? Are you required to keep any log files etc.?
A lot of people use PHPProxy Tons of ways, check out http://www.proxywad.com for a free listing. I wouldn't use adsense, too risky! You may get banned. Do direct sales. Not sure about the legal issues, you are best off calling a lawyer.
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