Do yo have a process running called "WUAUCLT.exe"? If so, stop that process and see if SVCHost drops. If it does then the problem is caused by automatic updates.
As already said, make sure you have SP3 and IE8 and if you don't then install them from the microsoft update website as soon as you can.
finally, open Disk defragmenter and analyse the c:\ drive. If you see a lot of red then defragment the hard drive.
I gave up on AVG antivirus on windows XP as it is now too much or a resource hog and no where near as good as it used to be. Now i use Microsoft security essentials and Malwarebytes. My pc's run a lot faster since this switch.
Alfa GT 3.2 V6 - Quaife diff, Wizard SS manifolds, Scorpion SS downpipes, Scorption GTA catback, Bilstein b4 Dampers, braided brake lines, MTEC drilled disks, Red Stuff pads.