Workaround is to "forget" entire VPN config.

+ cernekee - major Google customer is facing this issue. Do you know who could take a look?

I have a fix in progress.

The following revision refers to this bug:
  https://chromium.googlesource.com/chromium/src.git/+/c8bd543bff627677301ee63cf66abe2b7023bcf5

commit c8bd543bff627677301ee63cf66abe2b7023bcf5
Author: Steven Bennetts <stevenjb@chromium.org>
Date: Mon May 21 23:29:51 2018

Settings: Internet: Correctly make proxy exclusions editable

Bug:  844117 
Cq-Include-Trybots: master.tryserver.chromium.linux:closure_compilation
Change-Id: Ie54bc10acac1463d4b9d06dbc54fd540f1a4b463
Reviewed-on: https://chromium-review.googlesource.com/1067490
Reviewed-by: Toni Barzic <tbarzic@chromium.org>
Commit-Queue: Steven Bennetts <stevenjb@chromium.org>
Cr-Commit-Position: refs/heads/master@{#560402}
[modify] https://crrev.com/c8bd543bff627677301ee63cf66abe2b7023bcf5/ui/webui/resources/cr_components/chromeos/network/network_proxy.html

This doesn't affect a lot of people and there is a work around, but it's a pain for the people it does affect.

The fix is CrOS only and fairly trivial.

This bug requires manual review: We are only 7 days from stable.
Please contact the milestone owner if you have questions.
Owners: cmasso@(Android), cmasso@(iOS), kbleicher@(ChromeOS), govind@(Desktop)

For more details visit https://www.chromium.org/issue-tracking/autotriage - Your friendly Sheriffbot

Has the fix been confirmed/test on impacted and other devices?

Any/all devices were affected by the bug. Simple repro:

1. Navigate to Settings > Network > WiFi > (any wifi network, I recommend an open network, see 'Workaround' below)
2. Expand 'Proxy'
3. enable 'Allow proxies for shared networks' if necessary (i.e for shared networks)
4. Set Connection type = manual
5. Enter 'foo.com' (or anything) in the input field before 'Add exception' and click 'Add exception'.

Observe:
Entry appears in 'Do not use the proxy settings for these hosts and domains' with no way to remove it.

Workaround:
To remove the proxy exception, 'Forget' and re-configure the network.

Note:
In 68 here is a bug (fixed in ToT) preventing saving of the proxy configuration, but it should be reproducible in 67.

Sorry,  stevenjb@, just to confirm, you're saying in your 'Note:' that the fix has been confirmed, I assume?  Seems a bit like an added feature late in the M67 lifecycle.  Impact if declined?

It's definitely a bug, not a new feature, it just survived several releases before it was reported. At this point it is more embarrassing than anything.

Rejecting after a review with Steven since there's a workaround and this isn't a top priority (and since it has been in prod for some time).

Hi team, thank you for the attention that you are showing for this report.
Will this mean that the fix was rejected to be merged in version 67 but will become available in version 68? 

Yes, that is correct, the fix is in 68. For 67 please follow the existing workaround.

Thank you for the confirmation stevenjb, we'll update the customer about this.