I half suspected it might not, as generally it is something which resolved update problems early in the boot, but the streaming updates also happen at other times outside of boot.
personally I would leave it on No Proxy as that is the correct status, unless you specifically use a proxy [not the web shield] to connect to the internet. This means that the regular auto updates doesn't have to check your IE settings to see if you use a proxy.
Try a repair of avast:
XP - Add Remove programs, select 'avast! Anti-Virus,' click the Change/Remove button and select Repair, click next and follow.
Vista, win7 - Control Panel, Programs & Features, uninstall a program, select 'avast! Anti-Virus,' click the Uninstall/Change and select Repair, click next and follow.
You may need to reboot after the repair.