XmlDocument has a property XmlResolver which you can set as needed to a
resolver so you can do e.g.
  XmlDocument xmlDocument = new XmlDocument();
  XmlUrlResover urlResolver = new XmlUrlResolver();
  // set proxy and/or credentials on resolver as needed
  xmlDocument.XmlResolver = urlResolver;
  // now call Load method e.g.
  xmlDocument.Load(@"file.xml");

I had the same problem reading from a cxml doc.  I did this:

XmlReaderSettings setts = new XmlReaderSettings();

setts.ValidationType = ValidationType.None; // no DTD validation

setts.XmlResolver = null; // do not even download the DTD

setts.ProhibitDtd = false; // to avoid an exception due to the presence of a
DTD in the XML doc

Encoding encode = System.Text.Encoding.GetEncoding("utf-8");

// pipe the stream to a higher level stream reader with the required
encoding format

StreamReader rstrm = new StreamReader(memstrm, encode);

// create the base reader object. necessary to apply the above settings

XmlReader xread = XmlReader.Create(rstrm, setts);