I hate these spywares, they keep finding ways to sneak into my system every now and then.
Earlier it was “New Folder.exe” and then these other irritating viruses, and now Antivirus XP 2008.
Thanks god this time my Avast was able to detect the virus and delete it. But the real problem was, the moment this rootkit virus was detected and deleted, Antivirus XP would again install this rootkit virus.
Initially I thought that a boot time scan would be sufficient to remove this virus from my system, though it does not turned out that effective even though Avast removed more then 240 infected files.
The reason turned out to be Antivirus XP 2008, it was running at boot time resulting in re-infection.
So I finally had to get into action, to take back the control of my PC.
Here is step by step account of what I did(remember all this was done immediately after boot-time scan by Avast) to uninstall and remove it from my PC.

