Interesting.
We have AVG installed on 5 computers for better than five years on a couple of them and haven't experienced any difficulty. No slowdowns, nothing. I want to clarify the 'no slowdown' point. When AVG had a major make-over they included a new feature called Link Scanner. Initially that slowed us all down so I deselected the Link Scanner option. That may have been a common problem at the time because I remember several people complaining about their AVG update slowing down their browsing. I think that AVG fixed the Link Scanner issue as we all use it and browse just fine.
AVG isn't our only security tool either. We all have McAfee Site Advisor for both FF and IE. MSA is similar to AVG's Link Scanner. Whenever it goes red we know enough to close the web page as quickly as possible.
Besides doing periodic scans with BlackIce rootkit scanner, Panda's online scanner and Microsoft Live's scanner we run Threatfire to detect zero-day infections.
I think we're pretty safe. I'll continue to think that until we're hammered by something. We perform fairly regular backups just in case.
"They're removing more and more functionality out of each subsequent "free" version release to try and push for more paid users." I think that's conjecture on your part and I'd like to see a couple, three-four links from you to back that up.