Ok Canuck, I certainly understand your pain!
This is what I came up with after more troubleshooting and reading other posts.
I firmly believe in all the latest patches for the OS, AV and now the firewall too. This was my goal and to leave it with old versions was not an option.
This worked for me on my system. Avast 4.5 is not the culpret, Zone Alarm 5.0 was! As ZA claims, ver 5.5.062 to be fully comatable with XP2 I upgraded to it. I happily found all connectivity working again. I had Internet Explorer pages not loading also. This was behavior very similar to a computer infected by a trojan server. Checked for that 3 ways and no. Another symtom I had was inability to start a download of a file, like ZA's 5.5 setup program zip file. Or TrendMicro Housecall. All these problems point to firewall issues.
Here's my latest recommendation to you: do Windows update, Download latest ZA free, Pro or what ever. If needed download it onto another box and transfer it to the offender. Disconnect your network cable, Shutdown your running ZA, start the install and choose "Upgrade", that will keep all your old program settings. Retry Avast 4.5 with E mail provider and it should work for you. Or at minimum, you will have the latest ZA. Good luck and keep at it!