I just installed the latest version of Avast! in Windows XP SP3 within VirtualBox, and updated to the latest definitions. It works fine on a clean install of Avast! Home Edition.
If you are running an older version of Avast!, you may need to uninstall it first. I was unable to upgrade directly, as it was producing false memory allocation errors in the updater. (I didn't try running the new version's installer over the old installation, as I was worried it may cause further corruption).
My best guess is something in the older versions on XP is not compatible with how the updates are given now. The latest version seems to solve this.