You do have unused space on your system disk?
I have AVG installed on an XP and a windows 7 system and neither have caused me any trouble with FileMaker 11 advanced...
I have 1.6 Gb. I suspect that is enough.
One would think so, but the error suggests a problem writing data to your disk.
Is it partitioned into more than one partition?
In windows systems, you sometimes see several partitions, each with it's own drive letter. Usually, the "C:" partition is your "System drive". If this matches what you have, select "C:" in My computer, right click it and select properities to check for free space on this specific partition.
If that all looks OK, I'd use a hard drive utility to check it over for problems.