1. The entries will remain in the logs as historical info until you clear the logs. The main thing is that the error didn't occur on reboot. So I would think it may just have been a glitch/hiccup.
I tend not to stray into the log viewer unless there is an error actually displayed on the screen or something isn't working in avast. The reason the logs aren't particularly user friendly are more for the analysts to use for debugging a problem.
2 & 3. I didn't expect anything else if it is a problem in win9x and it was still there in the 4.8.1169 I wouldn't have thought 4.8.1178 would make any difference to the win98 resources issue.
There is no need to remove log entries, they can be removed safely though using the log viewer, select the log, File (menu), Delete log.