you need to use the urlencode($str) function.
http://www.php.net/manual/en/function.urlencode.php
Also, you should not use quotes around the variable. This should work for you:
<a href="proxy.php?addressid=http%3A%2F%2Fmerlin.missouri.edu%2Fovid%2Fonline%3FT%3DJS%26MODE%3Dovid%26PAGE%3Dmain+NEWS%3DN%26D%3Db2a97">