[Newly added]
It looks like this is called the "AN Worm" or the "Zodiak Worm".

I finally got my hands on a copy of this malware. I tested it against free trial versons of Norton AV and Kaspersky AV (and updated the virus definitions for both). Kasperky detects it as Worm.Win32.VB.an. Norton misses it.

There are two free trial versions of Kaspersky Antivirus on download.com

http://www.download.com/3120-20_4-0.html?qt=kaspersky

It's late. Let everyone know

[End of new stuff]


If your antivirus software had detected this virus, it probably would have moved the virus files (winupdate) to your quarantine folder and they wouldn't have been there when you tried the manual removal steps above. However, I'm not familiar with the specifics of AVAST.

AVAST's own website has a list of viruses, but it doesn't list anything named "Adware", so my guess is that it is detecting some kind of adware program (popup generator) and quarantining that. If I had to make a guess, I would guess that AVAST added virus definitions to make it's antivirus program think that various adware programs are viruses, and remove the adware just like it removes viruses. However, I really don't know enough about AVAST to know what it has found based on your description. Unfortunately, different anti-virus vendors often use different names for the same virus.

In any case, if your quarantine folder doesn't contain any winupdates files, my best guess is that AVAST caught some other nasty thing on your computer.