I don't know if this will work or not but if you have tried renaming the auto_update_enabled file to auto_update_disabled file in the TDATA\080299ff area, I would try editing the irc settings (probably a long shot). I believe it is set up by default to connect to some other .no server. I don't know if it logs on to irc automatically for you or only if you connect manually to the irc server. Try changing something like this in the xml:
<irc>
<server>
not defined
</server>
</irc>
It is not your RSS news feeds if they were working properly before your avalaunch started freezing. That was the first thing I tried to disable when I ran into this problem, but that had no effect and it still froze after about 20 seconds.
If you don't have an 080299ff folder in your TDATA folder, I don't know what is up. Do you guys not even have that folder? Or maybe it is in another folder. I found mine by searching through a backup of my E directory on my computer.
I use the xmas 0.49.3 and renaming auto_update_enabled file worked like a charm for me and a few other people. Perhaps in an older version of avalaunch this was not how you disabled auto update. Try looking through the avalaunch.xml if you have an older version and can't find auto_update_enabled.
If nothing works for you try getting the official newest release and clearing all traces of avalaunch off your xbox including the "game save stuff" in the E directory. Back it up first in case something goes wrong. After the fresh install, check to make sure auto update is disabled in TDATA\080299ff, you will have to run avalaunch first so it can create the files in the E drive.
If nothing works, you will probably have to unplug your network cable until the server is fixed or the next release.