Steps to reproduce:
1- Launch Blender
2- Switch the main view to a sequence editor. Press the 3rd choice for sequencer view (sequencer + preview)
3- Load any movie file.
4- select it, and Press N
5- in the view properties, under Proxy/Time Code: enable proxy timecode.
6- In the strip menu invoke "Rebuild Proxy and timecode indexes"

Result:
the operation ends immediatly. The console prints:
"Canceling proxy rebuild on users request..." a very cryptic message that is also not true ( i did not request this cancellation!!!!)

6b- In the seqncer header, select Sequence in the view options (turn off the preview)
7b- repeat 6.

Result:
This time it works!!!!

If it is not for some reason, possible to do this with the preview open, a less cryptic message should pop up and inform the user they need to turn off the preview.

GNU/Linux (Fedora 17) 64 bit, Intel CPU, nVidia GPU