Michelle, we have not had any issues with our firewall and location services, although we are not using a proxy serer (open DNS is used though).  Have you tested without using the proxy server?
It may help to look at the common ports Apple is associated with:

IMHO with the 20 ipods I would certainly not use more than 1 itunes account, however you are supposed to be using the volume voucher program and purchasing 20 licenses for those 20 devices (which is convenient since you get a price break of 50% when you buy 20).  
To keep the apps from installing automatically you can turn that off in the Settings-Store automatic downloads.  Although we actually use that feature to our advantage, so we don't have touch each device to install the Apps.

Rob Gervais
Director of Technology
Enosburgh Town School District
Enosburg, VT 05450
65 Dickenson Avenue
802-933-7777 x243