You are right. error 80240016 is a registry issue. The fact the AVG is not updating, would suggest it a registry issue. Possible malware i would say. Spybot Search & Destroy i always find quite helpful. You may have to uninstall AVG a clear the registry of AVG entries. Once this is done Windows update will hopefully start to work for you.
Jan 02, 2009 Rating
Update Error - Vista - This worked! by: Anonymous
As per the help from a friend who works on computers, this is what I did and it has worked.
I deleted my "AVG Free" anti-virus. Installed "Spyware Doctor" (Free Download), found lots of problems. Then tried Microsoft Update, which worked. Reloaded AVG Free, ran it, updated it, and found a "virus".
This may work if your computer has a virus, spyware, adware, or malware!
My big lesson, run all possible to make sure no junk is in my system!!!