There's little point in ...
... running your own DNS/Proxy etc, as all those requests still go through the ISP's routers on UPD port53/TCP Port 80 respectively and can be redirected/stored or whatever without you knowing anything about it.
Cookies? They'll be of no use for DNS traffic (coz it doesn't use cookies) and is unlikely to be of much use for HTTP traffic. Cookies are tied to a site, and unless you are sending a request to that site (either through your location bar, or via a web page downloading an advert from some third-party site) the cookie won't be sent.
I'm with Virgin at the moment (until I get Sky TV/Broadband installed next week - no more Virgin/Phorm, but probably a whole new set of problems!) and I know they use an 'transparent proxy'. This is a proxy that all HTTP traffic goes through without you having to set a proxy setting on your machine. You can tell it's there because if you create a web page that simply displays all the http headers it receives as part of a request from a browser, it shows the 'X-Forwarded-For:' header with my IP address. This is added by the proxy so the web site knows where the request originally came from. The IP Address the web server thinks the request came from (in this case 129.188.8.162 - no reverse DNS lookup for this IP address) is the IP address of the transparent proxy.
I once asked NTL to turn this off. I was told to call back and speak to a higher-tier engineer who could do this for me. It sounded hopeful, so this is what I did. When I spoke to the engineer though, he proceeded to try to tell me how to remove proxy settings from IE (as if I'd use IE - yuck)! A bizarre conversation followed, while I tried to explain what I actually meant, including asking the engineer to go to the page displaying the headers, and him getting confused because he thought it was some sort of error page. Doesn't say much about NTL engineers. He eventually understood, and then said it couldn't be turned off for individual users.
The prospects of turning this Phorm tracking/logging off for individual users is also unlikely. That would require some major additional processing from some routers, and a system for controlling the config of said routers. As that would be expensive and entirely counter productive to what they are trying to achieve. I think they are more likely to rely on legal arguments to justify what they are doing. Unless they back down from sufficient negative publicity, the only way this is going to end is in court.