installing PSv3 - "The update does not apply to your system"

Hi,

Trying to install PS v 3 on a Windows Server 2008 Standard 64bit with SP2. Dotnet4 Full is installed and followed this MS articles http://technet.microsoft.com/en-us/library/hh847837.aspx#BKMK_InstallingOnWindowsServer2008LH but no luck. I keep getting "the update does not apply to your system". Is the MSU file trying to go out to internet since we are behind a proxy?

thx