memetic - I'm running Mailwasher 4.1.7.5 and I don't think there are any time-out settings in it. I think they are all in OE.
BRL - have you tried the Mailwasher help desk? You could try turning off the 'check incoming' in AVG and see if it helps? You may need to shut the thing down using Task Mamager if it will not die gracefully