Thanks. That makes a lot of sense.

However it hasn't worked. I've added that directive but still all the files written by the perl script invoked by squid are unreadable. Even my hacky solution of adding a chmod line to the perl script didn't work. Very frustrating.

Working with squid Mountain Lion seems to have big problems. It can't even correctly create its own directories in its own cache folder: folders it creates have permission d--------- and it can't write to a folder it created itself.