* The antivirus and "Internet Security" packages from both Norton and McAfee have definitely caused headaches for a lot of people, and even when they're working properly, they put a heck of a load on your system (especially your startup time).
* The free version of AVG is only the antivirus program; it doesn't include a firewall. As far as antivirus program go, though, AVG is very good; it's the AV program I install on my clients' systems when they get sick of the hassle and cost of Norton and McAfee. :D
* Unfortunately, an antivirus program alone isn't enough protection; you should have at least one antispyware program installed/running in addition to your AV program. Microsoft itself has the Window Defender antispyware program avalable as a free download, and the AVG site has a download link to the free version of ewido antispyare, which is an excellent spyware detection and removal program. The free version of ewido does have two limitations, though:
1) It doesn't constantly monitor and protect your system like AVG and Defender; you have to run ewido scans manually.
2) It doesn't automatically update itself; you have to manually download updates for it.
* You should at least enable Windows' built-in firewall (available in XP SP2 only), especially if you don't have a broadband router with a built-in firewall. As for other firewall programs, there are obviously ones that do a better job than the Windows firewall; this page has download links to a number of those programs.
I've been using the free version of Sygate firewall for quite a while and have been very happy with it. Zone Alarm is another popular free firewall.
The following threads have many more suggestions on protecting and "disinfecting" your system:
http://www.daniweb.com/techtalkforums/thread28196.html
http://www.daniweb.com/techtalkforums/thread27519.html
http://www.daniweb.com/techtalkforums/thread27570.html