squid is pretty easy to setup. If you are comfortable with compiling, you should grab the sources and make it. Either way, you'll have to study the squid configuration files anyways... that is if you want it to work the way you want.
As for distro, I'd recommend which ever one you are most comfortable with. It doesn't really matter, as long as squid will compile.
All the major distros have squid with it.
I like suse, use the squid thats built-in, then manage it with webmin. Check out webmin too