Caeliferum,
Yes that is the right host file

it is clean nothing in there.
Let's try running AVG in safe mode and see if it can remove it:
Reboot in to Safe mode:
Restart Windows after you see the BIOS screen and before Windows starts to load.
Start tapping the F8 key. The Windows Advanced Options Menu appears.
Use the Arrow key to ensure that the Safe Mode option is selected.
Press Enter. The computer then begins to start in Safe mode.
Start AVG and do a Full scan of your system, quarantine anything it finds and make sure that you
Save the Report.
Reboot to normal and Explore to:
C:\Program Files\HijackThis\HijackThis.exe
Right click on HijackThis.exe and select Rename and rename it to hjt.exe
So it should look like this:
C:\Program Files\HijackThis\hjt.exe
Now click on the newly renamed hjt.exe and create a new scan log.
Post the new log along with the AVG report in your reply.