First check the contents of the C:\Program Files\Alwil Software\Avast4\Setup\setup.log file, which should show you why it thinks the reboot is needed.
Itsnow, if you can interpret the results, just post here the last 150 lines of the log, for instance.
19:43:25 min/gen Started: 17.06.2007, 19:43:25
19:43:25 min/gen Running setup_av_pro-3e9 (1001)
19:43:25 nrm/sys Operating system: WindowsXP ver 5.1, build 2600, sp 2.0 [Service Pack 2]
19:43:25 vrb/sys Computer WinName: BRUTUS
19:43:25 min/sys Windows Net User: BRUTUS\Larry
19:43:25 min/gen Cmdline: /downloadpkgs /noreboot /updatevps /silent /progress
19:43:25 vrb/gen DldSrc set to inet
19:43:25 vrb/gen Operation set to INST_OP_UPDATE_GET_PACKAGES
19:43:25 min/gen Old version: 3e9 (1001)
19:43:25 nrm/gen SGW32P::CheckIfInstalled set m_bAlreadyInstalled to 1
19:43:25 vrb/sys Computer DnsName: brutus
19:43:25 vrb/sys Computer Ip Addr: 12.226.184.71
19:43:25 nrm/int SYNCER: Type: use IE settings
19:43:25 nrm/int SYNCER: Auth: another authentication, use WinInet
19:43:25 vrb/pkg Part prg_av_pro-3e9 is installed
19:43:25 vrb/pkg Part vps-74902 is installed
19:43:25 vrb/pkg Part news-4b is installed
19:43:25 vrb/pkg Part setup_av_pro-3e9 is installed
19:43:25 vrb/pkg Part jrog-7 is installed
19:43:25 min/gen Old version: 3e9 (1001)
19:43:26 vrb/fil SetExistingFilesBitmap: 1024->119->119
19:43:26 min/gen GUID: f63316a1-077f-4b01-aa91-3ed7987ba827
19:43:26 nrm/gen Server definition(s) loaded for 'main': 125 (maintenance:0)
19:43:26 nrm/gen SelectCurrent: selected server 'Download106 AVAST server' from 'main'
19:43:26 min/pkg GetPackages - set proxy for inet
19:43:26 nrm/int SYNCER: Type: use IE settings
19:43:26 nrm/int SYNCER: Auth: another authentication, use WinInet
19:43:26 vrb/gen Used server:
http://download106.avast.com/iavs4x19:43:26 nrm/gen Server definition(s) loaded for 'main': 125 (maintenance:0)
19:43:26 nrm/gen SelectCurrent: selected server 'Download83 AVAST server' from 'main'
19:43:26 min/pkg GetPackages - set proxy for inet
19:43:26 nrm/int SYNCER: Type: use IE settings
19:43:26 nrm/int SYNCER: Auth: another authentication, use WinInet
19:43:26 vrb/gen Used server:
http://download83.avast.com/iavs4x19:43:26 vrb/gen Used server:
http://download83.avast.com/iavs4x19:43:27 vrb/gen Used server:
http://download83.avast.com/iavs4x19:43:27 vrb/gen Used server:
http://download83.avast.com/iavs4x19:43:27 min/pkg Load C:\Program Files\Alwil Software\Avast4\Setup\prod-av_pro.vpu
19:43:27 vrb/pkg LatestPartInfo: jrog = jrog-a
19:43:27 vrb/pkg LatestPartInfo: news = news-4b
19:43:27 vrb/pkg LatestPartInfo: program = prg_av_pro-3e9
19:43:27 vrb/pkg LatestPartInfo: setup = setup_av_pro-3e9
19:43:27 vrb/pkg LatestPartInfo: vps = vps-75000
19:43:27 vrb/gen Used server:
http://download83.avast.com/iavs4x19:43:27 vrb/pkg Part vps-75000 was set to be installed
19:43:27 vrb/pkg Removed obsolete file part-vps-74902.vpu
19:43:27 min/gen Part of license key: W49400868H4100A1106
19:43:27 vrb/pkg IsFullOkay: vps-75000.vpu - not okay
19:43:27 vrb/pkg IsFullOkay: vpsm-75000.vpu - not okay
19:43:27 vrb/pkg IsFullOkay: vpsm-75000.vpu - not okay
19:43:27 vrb/pkg IsFullOkay: vps-75000.vpu - not okay
19:43:27 vrb/pkg IsFullOkay: vpsm-75000.vpu - not okay
19:43:27 vrb/pkg IsFullOkay: vpsm-75000.vpu - not okay
19:43:28 vrb/gen Used server:
http://download83.avast.com/iavs4x19:43:28 nrm/pkg DldPackage: C:\Program Files\Alwil Software\Avast4\Setup\vps-75000-74900.vpu, returned 0x00000000
19:43:32 vrb/pkg Diff ok, created: vps-75000.vpu
19:43:32 vrb/gen Used server:
http://download83.avast.com/iavs4x19:43:32 nrm/pkg DldPackage: C:\Program Files\Alwil Software\Avast4\Setup\vpsm-75000.vpu, returned 0x00000000
19:43:32 vrb/pkg Removed obsolete file vpsm-74902.vpu
19:43:36 min/pkg vps: needs to be updated [075000]
19:43:36 vrb/pkg FilterOutExistingFiles: 120 & 119 = 1
19:43:36 nrm/pkg Transferred files: 8
19:43:36 nrm/pkg Transferred bytes: 395247
19:43:36 nrm/pkg Transfer time: 1204 ms
19:43:36 vrb/int Sending stats '
http://download83.avast.com/cgi-bin/iavs4stats.cgi': 00000000 204
19:43:36 vrb/fil NeedReboot=false
19:43:36 vrb/sys Reboot set by filRenameOnReboot(C:\Program Files\Alwil Software\Avast4\Setup\reboot.txt,)
19:43:36 vrb/fil MoveFileEx("C:\Program Files\Alwil Software\Avast4\Setup\reboot.txt", NULL)
19:43:36 min/gen Return code: 0x20000000 [Something done]
19:43:36 min/gen Stopped: 17.06.2007, 19:43:36
19:43:37 min/gen Started: 17.06.2007, 19:43:37
19:43:37 min/gen Running setup_av_pro-3e9 (1001)
19:43:37 nrm/sys Operating system: WindowsXP ver 5.1, build 2600, sp 2.0 [Service Pack 2]
19:43:37 vrb/sys Computer WinName: BRUTUS
19:43:37 min/sys Windows Net User: BRUTUS\Larry
19:43:37 min/gen Cmdline: /refresh /noreboot /updatevps /silent /progress
19:43:37 vrb/gen Operation set to INST_OP_UPDATE_INSTALL_PACKAGES
19:43:37 min/gen Old version: 3e9 (1001)
19:43:37 nrm/gen SGW32P::CheckIfInstalled set m_bAlreadyInstalled to 1
19:43:37 nrm/int SYNCER: Type: use IE settings
19:43:37 nrm/int SYNCER: Auth: another authentication, use WinInet
19:43:37 vrb/pkg Part prg_av_pro-3e9 is installed
19:43:37 vrb/pkg Part vps-75000 is installed
19:43:37 vrb/pkg Part news-4b is installed
19:43:37 vrb/pkg Part setup_av_pro-3e9 is installed
19:43:37 vrb/pkg Part jrog-7 is installed
19:43:37 min/gen Old version: 3e9 (1001)
19:43:37 vrb/fil SetExistingFilesBitmap: 1024->119->119
19:43:37 min/gen GUID: f63316a1-077f-4b01-aa91-3ed7987ba827
19:43:37 vrb/gen Entering:UpdateInstallPackages
19:43:37 min/pkg Load C:\Program Files\Alwil Software\Avast4\Setup\prod-av_pro.vpu
19:43:37 vrb/pkg LatestPartInfo: jrog = jrog-a
19:43:37 vrb/pkg LatestPartInfo: news = news-4b
19:43:37 vrb/pkg LatestPartInfo: program = prg_av_pro-3e9
19:43:37 vrb/pkg LatestPartInfo: setup = setup_av_pro-3e9
19:43:37 vrb/pkg LatestPartInfo: vps = vps-75000
19:43:37 vrb/pkg ArePartsInstallable: 1
19:43:41 min/pkg vps: can't open event Global\vpsNew.sig
19:43:41 min/pkg vps: updated [075000]
19:43:41 vrb/fil Fix security on: C:\Program Files\Alwil Software\Avast4\*.*
19:43:41 vrb/fil Fix security on: C:\Program Files\Alwil Software\Avast4\ENGLISH\*.*
19:43:41 vrb/fil Fix security on: C:\Program Files\Alwil Software\Avast4\ENGLISH\HELP\*.*
19:43:41 vrb/fil Fix security on: C:\Program Files\Alwil Software\Avast4\ENGLISH\HtmlData\*.*
19:43:41 vrb/fil Fix security on: C:\Program Files\Alwil Software\Avast4\images\*.*
19:43:41 nrm/pkg Transferred files: 0
19:43:41 nrm/pkg Transferred bytes: 0
19:43:41 nrm/pkg Transfer time: 0 ms
19:43:41 vrb/fil NeedReboot=false
19:43:41 vrb/sys Reboot set by filRenameOnReboot(C:\Program Files\Alwil Software\Avast4\Setup\reboot.txt,)
19:43:41 vrb/fil MoveFileEx("C:\Program Files\Alwil Software\Avast4\Setup\reboot.txt", NULL)
19:43:41 min/gen Return code: 0x20000000 [Something done]
19:43:41 min/gen Stopped: 17.06.2007, 19:43:41
19:43:41 min/gen Started: 17.06.2007, 19:43:41
19:43:41 min/gen Running setup_av_pro-3e9 (1001)
19:43:41 nrm/sys Operating system: WindowsXP ver 5.1, build 2600, sp 2.0 [Service Pack 2]
19:43:41 vrb/sys Computer WinName: BRUTUS
19:43:41 min/sys Windows Net User: BRUTUS\Larry
19:43:41 min/gen Cmdline: /stopstat /silent /noreboot
19:43:41 vrb/gen Operation set to INST_OP_[16]
19:43:41 min/gen Old version: 3e9 (1001)
19:43:41 nrm/gen SGW32P::CheckIfInstalled set m_bAlreadyInstalled to 1
19:43:41 nrm/int SYNCER: Type: use IE settings
19:43:41 nrm/int SYNCER: Auth: another authentication, use WinInet
19:43:41 vrb/pkg Part prg_av_pro-3e9 is installed
19:43:41 vrb/pkg Part vps-75000 is installed
19:43:41 vrb/pkg Part news-4b is installed
19:43:41 vrb/pkg Part setup_av_pro-3e9 is installed
19:43:41 vrb/pkg Part jrog-7 is installed
19:43:41 min/gen Old version: 3e9 (1001)
19:43:45 nrm/pkg Transferred files: 0
19:43:45 nrm/pkg Transferred bytes: 0
19:43:45 nrm/pkg Transfer time: 0 ms
19:43:45 vrb/fil NeedReboot=false
19:43:45 vrb/sys Reboot set by filRenameOnReboot(C:\Program Files\Alwil Software\Avast4\Setup\reboot.txt,)
19:43:45 vrb/fil MoveFileEx("C:\Program Files\Alwil Software\Avast4\Setup\reboot.txt", NULL)
19:43:45 min/gen Return code: 0x20000001 [Nothing done]
19:43:45 min/gen Stopped: 17.06.2007, 19:43:45