Slowed down HDD access after update(Windows and Avast)

Hi. My PC has a problem. It has become very slow in fetching data from the hard drive. However this problem only exists in Win 7(Ultimate x64). I've installed XP on this machine as well in dual boot and there's no problem with it. It all started like this,
My PC didn't have an internet connection for a long time so when I got back internet connection, I tried to update everything including avast antivirus. As it was taking an unusually long time to update, I downloaded a fresh copy of avast and installed it. But after that, I started getting BSOD in the first reboot after the installation. So I logged into safe mode and restarted without doing anything. I was able to boot into windows and use it. But random BSODs started from here on. On that same night, I had downloaded all the windows updates which were pending. Random BSODs kept occuring frequently until I booted with 'Last known good configuration' option which made all the BSODs disappear. The problem of slowdown had already started after I chose to update, not sure which one among the antivirus and windows update is causing it. But after removing avast, the speed was improved a bit but nowhere near to normal. Whenever I hold F5 button, the icons disappear while refreshing which wasn't the case before this. The worst part is, all the games have extreme stutter which makes the framerate fall down to less than 10. GTA IV which used to run around 45-50 fps on an average now runs at 15fps average and drops to sub 10 frequently during stutters. I'm sure the HDD is causing the bottleneck as both CPU and GPU never reach 100% usage. Is there anything left that I can do before trying a repair install? Also, almost all the BSODs were caused by ntoskrnl.exe at address ntoskrnl.exe+705c0 if that helps. The summary is, something is making the HDD not function as expected which is causing slowdown. I got score of 3k+ in Win XP using Diskspeed software where as it was 1k+ in Win 7. I tried AVG too. But there's no difference in performance between nothing installed and AVG. Please help. Thanks in advance.
P.S I'm sorry if I've posted it in the wrong section.

Whoops. I should have waited I guess. I'm seeing your post now. I did a repair install and it took about 5 hours. Good thing is, everything is back to normal. Thanks layback bear. I need one more advice from your side, I've returned as my college vacations are over and there's no internet here so i can't download MSE. So, shall i proceed and install avg by creating a precautionary restore point or wait and download mse after i get internet? Thanks again.

Yeah. I won't be inserting anything other than game discs. So i will leave it be. Thanks a lot.

I went through the same scenario on a friends pc, short of the repair install of windows 7. With avast removed all was well. I reinstalled avast then turned off its components one at a time. Once I turned off the cloud services, all was well. I rebooted to be sure, still good. Turned the cloud services back on, and all was slooooooooowwwwww again.

hope this helps others.