First time - Squid

I have attempted to set up a caching proxy server with limited access control. The default squid configuration is kept intact, but a few small changes such as default http_port, access logging and ueser-authentication.

/etc/squid/squid.conf

# NETWORK OPTIONS
...
hostname: hostname
...
#Default:
# http_port 3128
http_port 8080
...
# TAG: cache_access_log
...
#Default:
cache_access_log /var/log/squid/access.log
...

# TAG: cache_log
...
#Default:
cache_log /var/log/squid/cache.log
cache_store_log none
...
# TAG: auth_param
...
# TAG: auth_param
...
# === Parameters for the digest scheme follow ===
authenticate_program /usr/lib/squid/pam_auth
acl validusers proxy_auth REQUIRED
http_access allow validusers
...
# TAG: http_access
...
acl privatenet src 192.168.0.0/255.255.255.0
http_access allow privatenet
...

I also created a /etc/pam.d/squid file

auth required /lib/security/pam_stack.so service=system-auth
auth required /lib/security/pam_nologin.so
account required /lib/security/pam_stack.so service=system-auth
password required /lib/security/pam_stack.so service=system-auth
session required /lib/security/pam_stack.so service=system-auth

Sadly the whole exercise failed.
Can someone please tell me what have I done wrong or point me to where I can find answers?

Thank you,
clue_less

Do you have the error the log file spit out? Here is the conf I use with squid 2.6: http://www.lindsay.ath.cx/stuff/squid.conf you can ignore the regex and refresh-pattern stuff.

Thanks esaym,
You make it look so easy.
But what about ueser-authentication?

clue-less