Trying to 'installworld' and proxy user issue

Ok, I have to say I'm a bit confused.  I ran through the handbook on how to
upgrade.  I've done this before, but this time I ran into some problems.

I ran 'mergemaster -p' before trying to do 'installworld', and the install
immediately fails because there is no 'proxy' user.  The thing is, the
proxy did get added to the master password file in /usr/src.  It just
doesn't exist (yet) in /etc.

So, what exactly should have happened here?  I looked on Google and noticed
someone else ran into the same exact problem.  It seems like you always
have this chicken and egg problem when building new OS versions: things
required to exist on the bootstrap version in order to get a new version up
and running.

-Clint