OK, so if the Ashampoo firewall still conflicts after having been "turned off", then it probably has to be uninstalled completely in order for it to not conflict with AVG 8. At this point I believe it would be best to decide which program you want to keep, Ashampoo or AVG 8, since you can't run both at the same time. You could continue to run 7.5 and your firewall and hope AVG straightens out the situation, but who know how long that will be or if it will even ever happen. My advice would be to ditch AVG and get an antivirus you can depend on. If you want, you can go back to AVG later when they have worked the bugs out.
I have run all the major free antiviruses, AVG 7.5--and now 8--Avast and Avira''s Anitvir. They all have their good points and bad, according to my tastes of course. A bit later I'll go into what I like and dislike about each. At this point you have a few courses of action to take based on your decision of what you want to do.

If you really want to use 8, you can try uninstalling the firewall, then reinstall 8 (after uninstalling 7.5 and see that helps. If you go this route the modified instructions would be as follows:
1. Uninstall AVG 7.5 from Add/Remove programs via Control Panel.
2. Take your computer offline. If on broadband, physically disconnect.
3. Uninstall Ashampoo firewall. Check their help file for specific instructions. Usually you will have to disable the firewall first for it to uninstall correctly, but for some it is not necessary. You should then be able to use Add/Remove or an uninstall shortcut in your start menu.
If present, also disable Spybot S&D's TeaTimer, Windows Defender, Ad-Aware's Adwatch and SpywareGuard.
4. Double-click
avg_free_stf_en_8_138a1332.exe to run AVG 8's installer. Since you have already chosen not to install LinkScanner/Toolbar and email scanner, you know how to do the custom install. If you have any questions, download the User manual in PDF format--something else that is broken in 8 is that you can't see the entire help file. There are some very good instructions on installing and it can be found in the Documentation tab here:
http://free.avg.com/ww.download?prd=afe#tba3If you want to install those components later, run the installer again. That would be the answer to your question if it is better to use configuration of the program or custom install. Besides, since I didn't install these components, there is nothing in AVG 8's interface that allows me to turn them on. I do not know if there would be a configuration option to turn the email scanner and Linkscanner off if you had installed them during setup. I believe you can uninstall them again by running the setup again and that would be the better option if you had the choice.
When installation is complete, the first run wizard will pop up. As mentioned earlier, delcline the updates and registering with AVG for now
5. Turn on Windows firewall. Via Control Panel, Security Center.
Windows firewall works as well as it can no matter the state of your Windows update status--in XP the only major change to it was when SP2 is installed. I checked your last HijackThis log and see you have SP2 installed so you shouldn't have anything to worry about as far as Windows firewall. But why aren't you fully patched? Besides having an antivirus with real time protection, keeping Windows fully patched is the single most important way to secure your PC. In fact, without patches, you should have the Linkscanner installed. That is what it is designed for, detecting sites that exploit vulnerabilities in your browser, Windows and other programs that interact with the net.
8. Restart again.
8. Connect to the internet.
9. Try running updates. (Click Update now).
10. If you can update, look for another firewall. Personally, I don't recommend ZoneAlarm--too many people have problems with it--including me--it just didn't agree with my system. Probably the two best freebies out there are Online Armor and Comodo.
The other choices are as follows:

Continue to use 7.5 and Ashampoo firewall together.

Ditch AVG and go with another antivirus and keep Ashampoo.
Of course there are variations to these choices, scuh as ditching both AVG and Ashampoo, but my recommendation is the third one. With apologies to colleagues in the security community, who I respect and have learned a lot from--AVG is often recommended and highly regarded--here's why I have never really liked it and it is my least favorite of the free AV's.
*No scheduling. This has changed in 8, but previously one had no option of when to run a full scan automatically. I don't care for scanning when my computer starts--I want to get logged in and go. For reasons of my own, I require the ability to run a scan overnight. Being on dialup I also like to have control over when updates are performed. The main reason I just recently gave AVG 8 a try is because I heard it now allows scheduling of full scans. However, so far the scheduler has initiated updates and one full scan on its own. The system scan was probably explained by a certain setting, but the updates are running but not at the time I schedule them for. The one system scan that did start on time took far longer than it should have.
*Certain important features are disabled that are only available in the pro version. Well, this is standard procedure for free AV's that we have to live with, but one feature that I think everyone should have is the ability to exclude certain files and folders. Both Avast and Antivir allow exclusions which are useful for eliminating the detection of false positives. There is another more important reason some folders should be excluded that I'll get into shortly.
*An overall disdain for users of the free AVG. I think the above two comments are a part of this--of course they have a right to make money from their hard work, and to limit some features, but AVG has struck me as being particularly condescending and difficult to deal with.
*Last, but by far not the least, it is possible that that using AVG will break System Restore. Not just possible, it will happen if you have an infection backed up to a Restore Point and you allow AVG to move it to the Virus Vault. I am proof of this happening. I have a small Zoo of infective files that aren't active that I've collected during the course of doing malware removal. After running the AVG full scan, about a a half dozen were removed from The SysRestore,
System Volume Information (SVI) folder. It is a little known fact that disturbing the SVI folder will break SR. All restore points are logged and if files are removed from SVI without modifying the log, it becomes inconsistent and SR won't run. The only way to fix this is to delete all your retore points by turning System Restore off.--then when it is turned back on a new restore point and correct log is created.
As another poster has mentioned, having an AV move detections automatically to the Virus Vault is not a particularly wise way to set up scanning options--but people are going to set it that way and having SR come up broken just causes confusion and more panic.
But this is the reason I want the ability to exclude files/folders from being scanned--so I can exclude SVI. This is actually the subject for a good debate that could be carried on elsewhere, such as shouldn't we know that there are infected restore points, but this is the main reason I'm switching from AVG.
Just one last comment on it, the removal of SVI files was begun by the old Ewido, which became AVG Antivirus which is now integrated into AVG 8. Ewido/AVGAS was a great program that we used on this forum to help clean up infected systems and greatly enhances AVG effectiveness, but still very few people know that it broke System Restore. Also the integration of AVG AV with the old Ewido makes AVG 8 a major revision and is why they are having to iron out so many kinks.
So if you go with another free AV, here are my own likes and dislikes.
AVAST Well, it's free, and I believe it puts more emphasis on P2P and instant messaging protection that the others don't have.
No schedulling options either, which is my main gripe against it. I haven't noticed slowdown, but have had it installed for quite some time on an old 98SE machine that is slow anyway. BTW, another strike against AVG 8 is that it will only work on Windows 2000, XP and Vista, so older OS's are left in the dust.
AntiVir: Fully able to schedule and has recently improved its detection rate, the latter of which has always been subpar for all the free AV's. The support forum is more relaxed. According to their comparison chart, it does actually scan for rootkits. Simple interface and logs are easy to get to. Has a light footprint so won't slow down your computer.
Avira allows its servers to get overburdened. During peak hours in Germany you may have updates fail and if they are set to automatic, you get no warning that they did. On my system I had some problem getting it to accept what actions to take on files, but that may be specific to my machine.
So my advice is to keep Ashampoo and ditch AVG in favor of AntiVir
I've probably missed some questions of yours again but it is getting late. Let us know what you decide.