Haven't heard that AVG is dumping the free users, however it seems plausible that the servers for updates to the free versions are likely overtaxed at times. For some reason it is the most popular free AV on Cnet.
For those that don't want to change AV's, just periodically keep trying to update. Eventually it'll happen....
For those that do, I'm 100% happy with Avast,
Avira also has a very satisfied user base, with the most frequent complaint a browser nag screen during updates.