ClickOnce installation involves verifying that the server name matches the expected name. Thus localhost always gets translated under the covers to the computer name [not the username as you suggest in your question] (one of many confusing things ClickOnce does - one side effect of this is that if you want to set up 3 download servers, you need to do 3 separate publishes and/or script the publish like this) or like this. So this is not a surprise - it's always doing that under the covers.
The 407 error relates to proxy auth. This implies downloading is being diverted via a proxy such as Microsoft ISA Server. Have a look in your IE Internet Options Connections Proxy Settings and make sure its bypassing for local addresses [such as chrish].
The reason it's reporting success is that the upload likely uses an alternate mechanism than the verification does and isn't being routed via / blocked by the proxy. (The underlying problem is that the .NET framework does not by default pass proxy credentials and you'd need to either apply a config entry for devenv or whatever does the publish or have the build process call a test step with extra code that does send the proxy credentials](http://blogs.msdn.com/jpsanders/archive/2009/03/24/httpwebrequest-webexcepton-the-remote-server-returned-an-error-407-proxy-authentication-required.aspx). See also http://stackoverflow.com/questions/299940/how-should-i-set-the-default-proxy-to-use-default-credentials)