No it isn’t indicating lots of VIRUSES with the "end note being Error: Archive is password protected.(42056) "

They are files that can’t be scanned and that is the reason why.

Well the All Packers option is off by default, so you must have enabled it. There are only three packers (and ntfs streams) that are on by default and you should leave them enabled, as unlike other packers they are executable (self extractors, etc.) and present an immediate risk.

I’m not sure this is related to avast:
All my Files and programs have become “.ink” format, all the icons have lost their logo’s, also no program will open except firefox and avast.

Have you had any malware alerts and not just files that couldn’t be scanned and if so what action did you take ?