Have you ever seen it happen when using IE8, before, though?
New territory, at least for me. (Must download IE8, see what the story is.)
So just a few ideas/theories/research results to try...
32 or 64 bit Windows XP? (Adobe Flash is not supported for 64bit OS in IE8)
Do you have "Windows Steady State" installed? If so, Under Feature Restrictions – uncheck "Third party extension buttons".
Running an admin account? Will need to to install the add-on.
Another way that might work is to download the flash player to your desktop (or convenient software storage folder) and try installing it from there.
As a last resort, try disabling DEP, at least temporarily.
There are a lot of posts about IE8 and Flash player problems on the web at large, including the problem you are having.
This is a MS/Adobe issue, rather than Avast.