If your internet connection dies and you're using AVG, try uninstalling it.
From personal experience, it seems that the latest update may more or less kill your internet connection. I'm using XP SP3 and did not install the link scanner option in AVG.
I was immediately suspicious that the AVG update was responsible for my problems since they began after a required restart. I unistalled AVG and all was well, reinstalled and the internet was fine, manually updated again and my internet connection died again. When I uninstalled AVG, my internet connection worked fine again.
NOTES 1) This problem occurs in the absence of the Windows firewall and ZoneAlarm. 2) No error messages appear, but cached data may be displayed immediately - very odd! 3) Email also failed. 4) I only tested with Firefox and Thunderbird. If you experience this problem you could try IE and/or Opera.