Once you have downloaded an update and it has been incorporated into the AVG installation the downloaded file is no longer needed and can be deleted.
HOWEVER the updates now only contain the latest info and not the old ones as well, hence the size of the update file has now dropped from 1- 3 Mb to a few Kb!!!
When AVG does an update check it looks at what version you have. If you are several updates out you will then need to download a large update containing all the previous updates to the current one. If you are one or two updates out then it'll download a smaller file to bring you up to date.
So to answer the original question once you have run the update you can delete the contents of the UPDATE folder under you AVG installation to clear space on your HDD if you so desire.
Also it doesn't matter if you leave or delete the CTF file - it doesn't affect the AVG Update operation in any way.
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