Problem with configuration of Squid-1 server that has an "authenticated Squid-2 parent".

Squid-2 parent's Proxy detail: port-3128 + userid/passwd

Squid-1 server IP :
eth0 -- (connected to Squid-2)
eth1 -- (connected to LAN through ethernet switch , DHCP configured, LAN PCs take IP from 192.168.1..2 - 198.168.1..254)

I am trying to access internet on LAN PCs, but all efforts have gone in vain.
OS: SuSE 11.0 64 bit
The detail of squid.conf is listed below:
cache_peer parent 3128 3130 no-query
prefer_direct off
acl manager proto cache_object
acl localhost src
acl to_localhost dst
acl localnet src
acl localnet src
acl localnet src
acl SSL_ports port 443
acl Safe_ports port 80
acl Safe_ports port 21
acl Safe_ports port 443
acl Saf_ports port 70
acl Safe_ports port 210
acl Safe_ports port 1025-65535
acl Safe_ports port 280
acl Safe_ports port 488
acl Safe_ports port 591
acl Safe_ports port 777
acl purge method PURGE
access_log /var/log/squid/access.log
acl plasma_net src
acl plasma_net src
acl plasma_net src
acl plasma_net src
http_access allow plasma_net
acl lan src
http_access allow localhost
http_access allow lan
http_access allow all
http_access allow localnet
http_access deny all
acl ftp proto FTP
http_access allow ftp
http_access allow manager localhost
http_access deny manager
http_access allow purge localhost
http_access deny purge
http_access deny !Safe_ports
http_access deny CONNECT !SSL_ports
http_reply_access allow all
icp_access allow all
icp_access allow localnet
icp_access deny all
htcp_access allow localnet
htcp_access deny all
http_port transparent
hierarchy_stoplist cgi-bin ?
cache_mem 8 MB
memory_replacement_policy lru
cache_replacement_policy lru
cache_dir ufs /var/cache/squid 100 16 256
minimum_object_size 0 KB
maximum_object_size 4096 KB
cache_swap_low 90
cache_log /var/log/squid/cache.log
cache_store_log /var/log/squid/store.log
emulate_httpd_log off
ftp_passive on
refresh_pattern ^ftp: 1440 20 10080
refresh_pattern ^gopher: 1440 0 1440
refresh_pattern (cgi-bin|\?) 0 0 0
refresh_pattern . 0 20 4320
always_direct allow all
connect_timeout 2 minutes
client_lifetime 1 days
cache_mgr webmaster
visible_hostname plasma1
icp_port 3130
error_directory /usr/share/squid/errors/English
coredump_dir /var/cache/squid
cache_swap_high 95


When any LAN - PC tries to use internet, I get following error in my access.log and
1249380237.766 294 TCP_MISS/503 2419 GET ........
1249380328.894 290 TCP_MISS/503 2468 GET ........
the user gets following error:

while trying to retrieve the URL.............. The following error was encountered: Connection to Failed. The system returned: (101) Network is unreachable

[whereas, i am able to access above url / ip from server at same time]

Also, I have disabled firewall, as of now (MY ISP is highly secure / protected).

PLEASE, HELP me resolve this issue.