When [we] tested it, Chrome did not use the hosts file in any operating system but we were able to block Facebook in Chrome by adding www.facebook.com.Weird. I did go to my Mac's System Preferences -> Network -> Proxies, selected Auto Proxy Discovery, and that seemed to make Google Chrome observe the /etc/hosts file.
There might have been more at work there, but I didn't want to mess with it further. Instead, I decided it was time to install my own Squid proxy. Of course, I wanted to see if someone had already made this less painful. :-) And voila:
A Squid wrapper for Mac. It installs and configures Squid, giving you a nice GUI to configure basic options. It is designed to be a personal proxy, running on your local box, but you can configure it to accept connects from other computers, a subnet, etc.
Side note, it was unfortunate that the URL filtering on my router wasn't very smart or else I would have used that instead.
Update:
I set Squid up as a transparent proxy, meaning basically that it requires no configuration by the clients, and that all HTTP traffic will go through Squid by default. The problem is with HTTPS. Using HTTPS with a transparent proxy appears to work with Google Chrome, which seems to delegate all proxy settings to the system, but it does not work with Firefox. With Firefox, HTTP did work, but HTTPS did not. Only when manually setting Firefox to use Squid as an HTTPS proxy did HTTPS proxying work.
Update:
When trying to accomplish the same thing on my Ubuntu box, this is how I got Chrome to respect Squid:
http://askubuntu.com/questions/66554/why-is-google-chrome-ignoring-my-proxy-settings
Update:
I set Squid up as a transparent proxy, meaning basically that it requires no configuration by the clients, and that all HTTP traffic will go through Squid by default. The problem is with HTTPS. Using HTTPS with a transparent proxy appears to work with Google Chrome, which seems to delegate all proxy settings to the system, but it does not work with Firefox. With Firefox, HTTP did work, but HTTPS did not. Only when manually setting Firefox to use Squid as an HTTPS proxy did HTTPS proxying work.
Update:
When trying to accomplish the same thing on my Ubuntu box, this is how I got Chrome to respect Squid:
http://askubuntu.com/questions/66554/why-is-google-chrome-ignoring-my-proxy-settings