I have to say that this issue seems not related to Avast itself. It might be possible that something happened when you were updating Avast, or maybe Avast already finished and something else happened when you were still away.
Avast won't restart your system automatically. If Avast, for whichever reason, needs to restart your system, it would show you a question and the user MUST confirm the reboot. It is NOT automatically performed.
Moreover, Avast doesn't even touch your system files.
The reasons for the reboot into Win98 are too many to mention. You would probably need to repair your booting files and/or boot sectors (and maybe even the MBRs) so to recover the capability to reboot into XP.
Remember that the boot system files are usually located in your first primary partition of your first disk, even when XP might be installed in a different partition. At least this is the most common behaviour.