If not, then have a look at Internet Explorer's connection settings.
I know you say you use Firefox, but this can have an effect.
Open IE, goto Tools > Internet Options, then the Connections tab. Click the "LAN settings" button. If there are any entries in there, make a note of them then remove them all. Click OK/Apply/OK. Test web connection with Firefox, then try installing AVG again.
I am trying to install the free AVG 2011 antivirus on my 3rd netbook in the house (all 3 are the exact same thing all running on the same systems) and the first 2 had no issues and now this one I can't get past where it is at "AVG Installer" and then it "fails" and asks to specify proxy settings - "configuration failed requires internet connectivity if your using proxy server specify settings"........ what do I do? I am using Mozilla Firefox just like on the other 2 netbooks. Windows XP. I would appreciate any help.