Confirming this FIXED my web shield "blocking everything-HTTP problem"!
I already had the keys in my registry set to %WINDIR%\Temp and %WINDIR%\tmp but it looks like AVAST doesn't like that path, even if it is valid... Changed this to %SystemDir%\Temp and it fixed it instantly!
This is weird though because I have this WIndows 7 installation since December and AVAST never complained about, in my case, problem started with the 6.0.1125 upgrade!