Apparently, there is a bug in this update and should simply be ignored until the next update. If you prefer, this item can be excluded from the scan.

This article ends with the following instructions:

 "Boot Sector of Disk C: Reading error" issue was already 
replicated in our teslab and our developers are working on it.
Do the following to fix it for now:
1) run AVG Test Center (double click the AVG desktop icon)
2) choose "System Areas Test Settings" option from "Tests" menu
3) press "Remove Boot" button
4) confirm OK

It's a temporary solution. Let me know if it doesn't help. Thank you.

Four of the five systems I saw with this error are Windows 98.