Here is how it is done:
Do NOT set proguard.config=proguard.cfg in your project.properties file.
in your build.properties file set
 proguarded=on    # or whatever variable you chose
Define these Macros if you are building Android so that debugging is always off:
  <macrodef name="set-app-debuggable">
    <sequential>
        <echo>Updating AndroidManifest.xml with debuggable set to true</echo>           
       <replaceregexp file="./AndroidManifest.xml"
                            match='android:debuggable="(.*)"'
                            replace='android:debuggable="true"'
                            byline="false">         
        </replaceregexp>
    </sequential>
</macrodef>
<macrodef name="set-app-not-debuggable">
    <sequential>
        <echo>Updating AndroidManifest.xml with debuggable set to false</echo>          
        <replaceregexp file="./AndroidManifest.xml"
                            match='android:debuggable="(.*)"'
                            replace='android:debuggable="false"'
                            byline="false">         
        </replaceregexp>
    </sequential>
</macrodef>
Then set these conditions or similar to these depending on if you want to preserve debugging outside proguard builds:
<target name="-set-mode-check">
    <echo> set mode checking properties ... </echo>
    <echo> Proguard Property  value is '${proguard.config}' </echo>
    <echo> Proguard Property  value is '${proguarded}' </echo>
    <condition property="proguard.config" value="proguard.cfg">
       <isset property="proguarded"/>
   </condition>
    <echo> Proguard Property  value after condition set is '${proguard.config}' </echo>
     <if condition="${proguarded}">
        <then>
            <echo>****  This build is proguarded so setting debuggable off  ****</echo>
            <set-app-not-debuggable />
        </then>
        <else>
            <echo>****  This build is not proguarded so setting debuggable on ****</echo>
            <set-app-debuggable />
        </else>
    </if>
</target>
No need to set proguard.config in the project.properties file at all.