I'd say it depends on your application and environment. Obviously using Cisco is going to be more industry standard than a custom built Linux box. Also, I'd guess the Cisco will have a higher 'up' time due to no moving part (harddrive). And, the router will probably suck less power, make less noise, and take less room
That said, I'm all for Linux. We have a Linux box w/ a T1 card that interfaces with our phone pbx for custom IVR stuff -- it works great. Any dist would probably contain all the necessary software to do the routing and firewalling. And, the software updates are sure cheaper than Cisco. Just make sure you find a T1 card that includes Linux drivers -- they probably won't be included in the distro.
Even w/ the proxy server, that is probably overkill on the computer specs though... T1s don't move THAT much data
I had a Pentium pro 200 w/ 4 PCI 3com cards running bridge software and firewall via ipchains for 2 different 100mb networks and it never saturated the CPU...
If it was me and I had the resources, I'd probably seperate the router functionality from the proxy funcationality (dedicate that high power server for the proxy server, use a lower power machine for the router).
Jon