That’s exactly what I was going to recommend. I’m running it right now on my 1.8Ghz. I augment it by running in a limited user account, and a program called Process Guard, which adds a layer of protection by not allowing programs to run unless you explicitly allow them. I might also recommend sandboxing your web browser (see the third post in the sticky), but that’s a bit more advanced. None of these programs should significantly slow down your computer.
I also agree with Markxxx’s recommendation to try shutting off AVG features you don’t need. Antiviruses are having to add a lot of features for people who aren’t intelligent about their computer use. Web Shield and Email Scanner are pointless if you make sure you scan any downloads before you run them (Heck, webmail like Yahoo! Mail or Gmail do it for you.) Phishing protection can be handled by not disabling your address bar from disappearing, and not following links to get to sites that want personal or credit information.
The rest of the web based stuff can be handled by using Firefox and the appropriate security extensions. Noscript is probably the best, but Noflash and Adblock Plus do a pretty good job as well. Add the programs I mentioned above and you’re set. (Avira excluded, as running two antiviruses is stupid.)
That leaves Anti-Virus, Anti-Spyware, Anti-Rootkit, Game Mode, and Update Manager. Keep 'em all if you can. (I hear Game Mode has some problems.) I think Anti-Spyware might be okay to disable if you are sandboxing, as long as you clear the sandbox before you submit any personal info and do a manual scan every once in while.
Finally, practice good Internet hygiene. Avoid seedy sites. Download from only trusted sources. Never believe an Internet ad saying that you might have a virus. Make sure your firewall and antivirus are up to date. And keep your important stuff backed up, just in case.