any recommendations on how to display photo proofs online for clients?

I have used Google's Picasa Web Albums for this. Once you have set up your account, you can create an unlisted album, and send the link to your clients.

When I have done this, I have resized the images to be relatively small, but large enough to see onscreen. Normally I use 640x480 pixels for this. It reduces the image size to under 100k in most cases.

I normally add the copyright message and a use statement in the album. Since most of my stuff is for a sports club, I am happy for other clubs to download provided they acknowledge my work, eg for their own newsletters. You might want more control than I am interested in. I think you could achieve that with Picasa, but there might be other sites that do this better.

I used to use Fotki.com. Its free , I would setup their photos in their own gallery with a password. However, do not order prints form Fotki.com, their prints are horrid.

Theres also quite a few services that specifically tailor to photographers, and are usually about $25/month.

Watermarked!

It's as simple as purchasing a domain and hosting and/or purchasing a website. Don't be lazy.