So it seems that this is a fault at AVG and the concensus is that it should be sorted out in tomorrow's updates.
Anyone else had this problem?
Edit to add this from the AVG site:
"Currently the update for AVG Free v8 is corrupted... you will have to wait for AVG Technologies to address the issue with the update.
Reporting the issue again by other users here will not do any good util it is resolved.
The updates that your AVG currently have will still provide the protection it is setup to detect. In otherwords, just getting this update will not make your AVG Free ineffective and as soon as AVG Tech resolves the issue you will be able to update to the current virus definitions at that time.
So in short... please do not post to report the issue, its already known. Also please be patient until AVG Technologies can address the issue."