The other options are there because not everyone is using a proxy and the button to get to it is marked Proxy settings, so if you don't have a proxy there is no need to enter that area at all.
That window in both cases is related to the proxy, if you use it then you have to Specify the Proxy details otherwise it is going to fail when trying to test a proxy connection.
The default setting is to Auto detect, so it checks IE to see if you use a proxy and if you did it would use that. So normally a user could get by on the default settings and never have to enter the Proxy settings window.
There are occasions when the Auto detect hasn't worked, so when that happens we suggest checking the Direct Connection (no proxy), but we don't have them test the connection, as that is pointless as there is no proxy.
Why your going that way round it and bypassing the avast 5 UI, is beyond me as those settings can be change much quicker in the UI in the first image I posted and as you will see there is no Test connection button in the UI.