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With the Windows 7/2008R2 firewall it doesn't seem possible to explicitly block connections that use 127.0.0.1 on a per process basis. I'm just wondering if I've missed something?

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Considering that many programs use loopback TCP connections as a form of IPC ­— why would you want to block that?! – grawity Mar 17 '12 at 20:50
To control which processes are able to pass through a proxy, installed by a popular antivirus program. It 'conveniently' opens a hole that allows any connection over HTTP, even if the application is specifically blocked or has no firewall rules at all. – Pulse Mar 17 '12 at 22:27

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Given that 127.0.0.1 is the loopback device, I would assume that special rules apply.
It wouldn't surprise me if any traffic on the loopback device simply bypasses (at least) the Windows firewall.

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That's exactly what's happening – Pulse Mar 17 '12 at 22:19
I'm not 100% sure on this, but I would assume that loopback traffic must not be intercepted. I just believe I vaguely remember something like that, but I can't think of where I read it right now. – Oliver Salzburg♦ Mar 17 '12 at 22:37
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The firewall doesn't block/inspect the localhost/loopback address (127.0.0.1) because it's your computer. So since the target and source are the same, there's really nothing to firewall.

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Unless one has a transparent HTTP proxy operating on 127.0.0.1 that simply allows any outbound connection regardless of rules. It's also possible to block these connections, by applying an outbound block to all applications. It simply won't work for individual processes. – Pulse Mar 17 '12 at 22:22
And this is a Windows firewall issue. Most reasonable third-party firewalls allow these connections to be controlled/blocked. – Pulse Mar 17 '12 at 22:24

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