To build an SMS proxy that redacts sensitive information from conversation threads, first set up a Pangea account and Twilio phone number. Then, create a Django application with Python 3, Twilio SDK, and ngrok. Configure the app to use the Pangea Redact service by setting up rulesets for data types such as email addresses and person names. The application reads incoming SMS messages from the Twilio service, passes them to the Pangea Redact service, which redacts sensitive information based on the configured rulesets. The modified message is then sent back to the Twilio service with a success response, and if necessary, an automated response is sent to the sender informing them that their message was redacted. Finally, make the app accessible publicly using ngrok to enable Twilio's webhook feature, allowing the app to receive SMS messages from any number.