Thanks to Win2008Workstation, this is finally resolved.
Something to do with AVG installer checking windows registry for "server" or just regular "WinNT". And the easy fix is edit AVG installer so it is tricked.
"Resolution:
1) We must get to the avgsetup.exe first and foremost. When you run the
original download, it actually extracts a folder to a temp folder. The
easiest way to get to it is to run the program and wait until it gets
to the first screen then STOP. At the initial setup screen, open task
manager, right-click on avgsetup.exe in the processes list and choose
“Open file location”. Quit the setup and then copy the entire folder
from the temp folder to your desktop for ease of use. The folder
contains avgsetup.exe as well as other setup files.
2) We must create an alternate key that AVG will look at to check
whether we are a desktop or server. In regedit (or whatever you use),
insert a new key named “ProductOption2″ under the
“HKLM\SYSTEM\CurrentControlSet\Control” tree. Since I did not want to
add any length to the avgsetup.exe upon editing, I simply replaced the
“s” in “ProductOptions” with a “2”.
3) Under that new key of “ProductOption2″, insert a new REG_SZ String named “ProductType” and change it to “WinNT”.
4) Use a hex editor (I used notepad++ with the hex-editor plugin) to
edit avgsetup.exe and replace the two instances of “ProductOptions”
within the EXE to “ProductOption2″. Make sure that it matches your key
you made in step #2 and also that it does not exceed the length of the
original (we dropped the “s” and added a “2″). Changing the EXE forces
the setup program to look at your new key instead of the real key.
5) Save it and run setup as normal. It should go right past the original “You’re installing on a server blah blah” error."