Can you try generating the OST for a connection to another org in another Salesforce instance? It's very possible that the issue is with the certificate chain for that particular instance (na35), though that would seem quite unlikely to me. It seems like that would be causing issues across the board. Another option would be trying to generate the OST against that same connection on a network that isn't behind the corporate firewall/proxy.
What I'm trying to do is minimize the variables and isolate the root cause. In the past when I've seen issues like this, it was almost always a restrictive corporate network and the problem did not occur on, say, a wifi network at a coffee shop. Obviously that's not the desired end state, but it would help us determine that it's a network configuration so that you might be able to check with IT as to what's happening.
Oh, and one other question...did you happen to restart the IDE after changing that setting? That's a core IntelliJ IDEA setting, so I don't know if perhaps they cache something or not. Might be good to see if you see the same issue after a restart with that checkbox selected. My guess is that it won't make a difference, but I'm just trying to think about ways to shorten the time to resolution for you.
Regards,
Scott