I've used both the AVG 9 paid and free. The paid version kept failing on the update, even with separate downloading and updating from files, as suggested by Support. I gave up and went back to the free version. In the free version, every time my Pentium III laptop starts up, I get a Windows 2000 message that the service has failed and is being closed.
I suspect that like many others, AVG no longer supports Win2000. Certainly AVG 2011 doesn't. Unfortunately, being 65 and living on a fixed income, I can't afford to upgrade every time Microsoft wants more stock dividends. I may have to go looking for an antivirus company that supports the older versions. I just wish that my old windows programs could run on OpenSolaris.
All of our Windows XP systems started breaking on the 9.0.900 AVG Business Edition. The solution was to install the upgrade to them to the new 2011 version. Users have pointed me to four systems already today, and after the upgrade all four are now running quite well.
As the AVG core is essentially the same in AVG Free as in AVG Business, I suspect you will find that updating from v9 to 2011 will solve your problem.