I have a VPS in the USA running Ubuntu. I want to setup something similar to http://www.usvideo.org Basically, USVIDEO is a DNS service that allows Canadians to access American content like Hulu, Netflix, NBC, and etc (restricted by geographical IP).

Here is how I think USVideo does it:

1. Clients (PS3, XBOX, PC) specifies the DNS server(s) as specified on USVIDEO.org's website.
2. If the DNS request is a video/audio site such as Netflix or Pandora, forward the request to a proxy. Otherwise, for all other requests, forward it to a different DNS server.
3. If the specific video/audio URL is requested, return the address of the proxy server, which in turn relays traffic to the destination video/audio domain via the U.S. gateway so that it appears that the access is coming from a U.S. IP address.
4. Once the DNS request has passed the U.S. IP address check, their proxy server steps out of the loop and lets the video streaming site contact you directly to start the video stream. This trick relies on the way that the video streaming sites check the country of your IP address once up front, but don't actually check the country of the destination IP address while the video is streaming.

What is elegant about this solution is that a VPN Tunnel is not required to bypass geographical IP checks from certain websites. All that is required on the client side is to specify the DNS server (the VPS). If a certain site is geographically locked, just forward the traffic to a proxy, and that's it. These sites can be specified in the DNS entries, or perhaps in the proxy service to redirect the DNS request to its own proxy.

I believe what I need to setup something similar is Squid Proxy, IPTables, and DNS. What I need help is how to exactly approach this? Would Squid Proxy be setup as a transparent proxy?