Should I update to sp3 first or install avast first?
You'll find different opinions.
For me, I update Windows (all updates available) then install avast.
I also tested install avast and then Windows XP SP3, it worked (with avast on).
Others will say that going on-line without an antivirus will be dangerous, so install Windows and then avast, then update to SP3.
Others also will ask to download SP3, disconnect, disable avast, install SP3.