If the user that you are currenlty logged in as, is a True Local Administrator then you should be able to do the following:
Right click on My Computer on the Desktop.
Select Manage
Expand System Tools
Expand Local Users and Groups
Expand Users
On the right, right click on Administrator
Select Set password
Enter new password and confirm it.
Once you have done that, then try to run the install again (Still Logged in as the current user with local admin rights) However, this time right click on the AVG Setup.exe and choose "Run As". It will ask which account you would like to use to install the application.
Choose "Following user", should default to the local admin.
Then just type in the password you have set for administrator, then OK