ok. I finally got it working. Here's what I had to do:
DansGuardian:
General -> Highlight (turn on) both forwardedfor & usexforwardedfor
Squid (Proxy):
Custom Options
acl other_proxy srcdomain My.Proxy; log_uses_indirect_client on; follow_x_forwarded_for allow localhost; follow_x_forwarded_for allow other_proxy; acl_uses_indirect_client on; delay_pool_uses_indirect_client on
Use the name of your pfsense box in place of My.Proxy
I also used "tail /var/squid/logs/access.log" & "tail /var/log/dansguardian/access.log" throughout troubleshooting this to find out what exactly was being captured in the logs.
Sources for this:
http://www.linuxquestions.org/questions/linux-security-4/dansguardian-and-squid-480571/
http://www.squid-cache.org/Doc/config/follow_x_forwarded_for/ (to understand follow_x_forwarded_for)