I had a customer today with virtually identical symptoms. An Avast update killed IE8 (In this case it was IE8) and he also had XP SP3 and a nice clean machine 1 month ago.
I could not get into the internet settings (told me they had been disabled by a policy)
Could not manage user accounts in Control Panel - just a white screen
IE stopped working - loaded but would not go to any web pages
Every time I tried to open a page in FF and Chrome it asked to save the HTML page as a file on the computer.
System restores were broken
I tried:
Uninstalling IE8 - would not uninstall as it was put on pre-SP3
No option to uninstall SP3 so tried to reinstall it. Seemed to work right up until reboot time. Then during the boot the OOBE process kicked in and IE8 offered to save the websites html file again so the SP3 would not reinstall.
Ran SFC - fixed nothing
Ran Chkdsk /f - fixed nothing
ran FRST - only things installed in last 30 days were Avast files (assume it did a program update)
Re-associated htm , chm, and html with IE - fixed nothing
Spent hours on it but no avail
I installed the system originally about 1 month ago and all was perfect. IE worked - updates worked - user accounts worked. IE worked, FF and Chrome both worked.
Ended up having to do a repair of XP (reinstall over existing installation rather than repair console), reapply SP3 and 100's of updates.
Was fine after that.
I had my suspicions that Avast update had trashed his machine but did not want to believe it. Now I hear your story I totally believe it.
As for your tale about support. This is common and Avast should be ashamed. I have made complaints myself on this forum and to Avast but it seems the bad practice is like a cancer in the 3rd party support company they employ.
Paul