Its a fresh install of XP, patched, default IE8 settings, works fine without webshield enabled, so nothing to do with IE, it's the virus scanner.
There are other reports of problems, I'm not the only one.
I've just uninstalled and reinstalled avast5, IE8 worked after install before reboot, and after reboot, but after a manual program and definition update, the problem starts.
Not too fussed about it, it's free after all, merely posted in this thread to provide the poster with a potential workaround, and if any of the developers read the site, highlight the bug to them