Hate to spoil your day mate but I found a rootkit stopping it updating / downloading on a friends computer and my machine's problem was solved by down loading the Update Readiness Tool for M$ - if that's any help.
Now the Kaspersky jumps on anything sus, and the Readinesss Tool might be an idea - can't hurt eh?
The rootkit I found with the Kaspersky TDSS Killler on the friend's computer - save to download > run from there with your UAC and then delete the download when youv'e finished.. Anti-rootkit utility TDSSKiller
having said that your AVG might not like the Kaspersky - I'm ok cos I have KIS 2011.
and the Readiness Tool is http://support.microsoft.com/kb/947821
NB After all that I can't remebe without searching what my eror codeswere but the one fixed by the Readiness Tool was close.