Hmm, just solved it.
Settings -> Updates -> Proxy Settings -> Direct Connection (no proxy) instead of Auto detect (use Internet Explorer Settings)
Where does it read these settings because IE works fine, Avast wasn't.. ?
EDIT: Confirmed, changing it back and it breaks again but IE keeps working. Where is Avast looking for IE Proxy Settings?
I just registered to this forum so that I could bump this...
I was having the same issues listed above after upgrading from 4.8 to Avast 5.0.545 on Win XP Pro SP3 using only windows firewall.
I uninstalled via the add/remove applet, rebooted to safe mode, ran the removal tool, rebooted, reinstalled, rebooted and it still wouldn't update.
I went to control panel/ windows firewall applet/ advanced and restored default settings.
Then I opened the avast ui and clicked settings and then selected the updates settings page.
I checked the box for "My computer is permanently connected to the internet". Then below I selected proxy settings and selected "Direct connection (no proxy)".
I then went back and started the update and it worked.
Thank you Dyslexic.
Kev