I'm pleased to hear that I'm not jumping to conclusions!
It seems that AVG 9 is chewing up the desktop in some way - The Windows 7 problem manifested itself when trying to download large files through iTunes so I'm wondering if there is a cache limit that AVG uses and it isn't large enough. The files would start then fail and then I would get a resource error on trying to open anything from the desktop. The network connection would also die.
XP just lost Office applications and Acrobat - Acrobat Reader, Excel and Word would just hang if the file size was too large (the PDF file was 500 pages long) so again this suggests that there is a memory allocation issue.
I've received a totally pointless email from AVG which seems to be looking in the wrong direction but I'll go along with it for now.
I'm not an IT/Systems expert, so the above is supposition only
Keep the ideas and experiences coming please!