Download a copy of hijackthis (
http://free.antivirus.com/hijackthis/)
Run it, and click "Scan and save a log file" or something along those lines.
When the scan has finished and notepad pops up with the logfile, copy it's contents and post it here - ill analyse it for you and then we can move from there.
A format is a pretty hefty decision, and rushing it due to malware can often lead to mistakes.
Running Malwarebytes AntiMalware is also a good idea (as suggested) try just installing normally in windows and scanning, see if it detects anything. If it does, attempt to remove it, if it doesnt remove it successfully, repeat the scan in safe mode (tap F8 on booting the system) and post the contents of any log files that Malwarebytes AntiMalware produces.
99.99% of malware can successfully and effectively be removed from a computer.
EDIT - seeing as you are unable to get into windows without it hanging, try all the above steps straight from safemode. The hijackthis log is the vital part in me being able to help you.
Also does AVG offer any name for the infection? Knowing what classification of malware it is will greatly help in it's removal.
Also check the directories -
C:\Documents and Settings\Administrator\Local Settings\Temp\umdmgr.ini
C:\WINDOWS\system32\umdmgr.exe
C:\sand-box\13a04f20a93c84b6bd1f3b77e3ef68e4.exe
Do these directories contain the above files? If so you can attempt to delete these from outside the XP partition (ie, in windows 7) i expect it will have some registry keys associated with it for startup runtime. Im not sure if you can browse and edit the registry from outside of the partition as of yet, but pending your reply i will look into it.
Feel free to pm me too as im working on two seperate machines atm.