Vista isn't great for performance, but it's okay for every day use
As for anti-virus software, they all have their own pros and cons and opinions on which is the best vary so much. In my opinion, the best protection is sat right in front of your screen, you
Stay away from file sharing websites and software, don't open any email attachments from people you don't know and lastly, pay attention to the WOT ratings for websites. If a Google result has a red circle next to it, do not click on it. If you disagree with the rating, at least read the community ratings on the WOT website before continuing. Here is a great article on staying safe online:
I would also recommend you use Firefox or Chrome to browse the internet as they are a lot more secure than IE, but by the look of your OTL log, you already do this. NoScript and AdBlockPlus are great Firefox extensions; AdBlockPlus is also available in Chrome. There's an annual competition to test the security of the browsers and a few mobiles, Pwn2Own, which IE has never survived:
Chrome has done the best, Firefox takes a close second place.
Whilst I've always believed that the best method of protection is stopping the files getting to your computer in the first place, sometimes things slip through the net as they did with your computer here with what seems to be a Java exploit and in situations like that, it's important to have an AV that will detect it. Microsoft Security Essentials has always been my favourite anti virus as it has good detections, is very lightweight on system resources and due to the fact that it is developed by Microsoft, it works very well with Windows - unlike a few other AVs who are known to be great at causing BSODs. AVG is average in my eyes and I would recommend that you switch to MSE, but the choice is yours:
Keep Malwarebytes' Anti-Malware installed and run a full scan on a weekly basis - the free version will suffice. It has excellent detection rates and has a very good team behind it