I removed Avast from my Sygate FW and then tried to update again. When asked, I again gave Avast permission again in the FW to access the net, but each attempt timed out.
Then, once again, shutdown my software firewall and even deleted my hosts file too, but each attempt to update Avast database timed out.
Finally, I gave up on Version 4.5
Fortunately, i had backed up my previous installation of V 4.1. I rebooted to Safe mode and copied the contents from my backup to the Avast folder under Program Files, and voila! Right away, when i rebooted to Windows, i was able to update Avast data base, and everything seems fine.
I didn't have to change anything else. My firewall settings and host file are in place again and nothing prevents me from updating.
The version i am using now is:
Version 4.1 Home Edition - Build 4.1.549 - Compilation date: 26.11.2004 File Version: 0448-1
It seems to me there is some conflict between V 4.5 and Win98SE. I see no other explanation.