If you were running Core Update 174 with 6 authentication options then it means that you still had the old version of proxy.cgi on your system.
There have been 12 updates of proxy.cgi since Core Update 127, so I would have expected you to have got the updated version of proxy.cgi somewhere in that period.
proxy.cgi was shipped with all of the following Core Updates:-
127 when the ntlm option was removed.
129
142
147
152
158
160
162
171
173
174
176
Even if you don’t update every Core Update it would seem difficult to have missed every one of those updates where proxy.cgi was shipped and hence a new version installed.
You mentioned that you upgraded from 174 to 178 and Core Update 174 shipped proxy.cgi so I would have expected you to already have run into this problem when that upgrade happened.
If you now only have the 5 authentication options then it sounds like you have the correct version now, without the ntlm authentication option.