The actual connection server is what you enter the information as, *not* as a proxy server. Look for something like "login.oscar.aol.com" and that's the area you edit. You should disable those proxy settings otherwise it won't work at all.
It may not be directly editable in that version, you may want to edit the hosts file. I'm not sure which version of Mac OS you are using, but in OS 9, the file is the OS 9 partition, preferences folder, and edit the hosts file. In there you want to put on a new line:
login.oscar.aol.com. A 126.96.36.199
slogin.oscar.aol.com. A 188.8.131.52
toc.oscar.aol.com. A 184.108.40.206
Or possibly easier, use a later version of AIM which may allow you to edit these, though I cannot confirm this and you may have to edit the hosts file anyway: