Here’s the RESOLUTION to the problem…

Go to ISA Management console, servers & arrays, this server, ACCESS POLICY, IP Packet Filters.

Create a new filter with outbound, tcp, local=dynamic, remote=all ports

Avast now finds the update server.
Solution was found in Win 2003 SBS Comunity, Newsgroups searching on ‘winsock’ which was mentioned in the Avast error logs several times.

Hope this helps someone.
Roger