I also had encountered that problem, and I found out that I have not put "localhost" or "127.0.0.1" under the "No proxy" list. Note that my PC is inside a network and connects through the internet via a proxy server. It seems that the resolution of the address (this includes 127.0.0.1) was done by the proxy server, and not my machine.
I don't know about Mozilla, but right now I am using firefox 0.8. I hope that the interface would be similar. If not, this is usually found somewhere near proxy settings tab.
To put 127.0.0.1 under the "No proxy" list in firefox 0.8:
Tools -> Options -> General -> Connection Settings -> No Proxy for:
Then put "127.0.0.1,localhost" on the text box (without the quotes).
Tell me if it works