AVG has done this (similar...ish) in the past and caused quite a big issue with XP users back in 2009 by associating a system file as a trojan due to a false positive error asking the user to delete it, which didn't go down well. I know it was a simple mistake, but it did put me off them and should not have happened.
Personally I'd dump it (using the AVG Removal Tool) and then install Microsoft Security Essential.
The above is your choice, but I'd do a Windows Update just in case.
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