Any time AVG tells me I have a virus it's always in the Tempory Internet Files. I let AVG deal with the file and imediately nuke every tempory piece of anything on my PC before restarting and doing a full virus and spyware scan.
If you hav not downloaded the Microsoft Anti-Spyware Beta yet you should. Get it here: click here
One of the nice things in it is under Tools and Advanced Tools there is a dynamic tracks eraser that can delete all the tempory information created by every programme you have installed. It's simple and easy to use.