I use AVG and I agree it can slow down your computer quite a bit if you just keep it with the default configuration. I turn off "active monitoring" and instead run a scheduled check of my computer once a day or so. I don't need AVG checking if I have a virus every 10 minutes. Once a day is more than enough. I still recommend you run AVG for that extra peace of mind.
As for free firewalls, the standard that most people use is ZoneAlarm. It's free for home use, and quite powerful. Definitely better than the built in Windows Firewall.
I don't run any firewall though, I feel THAT slows down my computer too much :P
Another precaution you can take about getting a virus is to run Safari or Firefox instead of Internet Explorer. Those two browsers aren't bullet proof but they're definitely a lot better in regards to security than IE. Or you can run IE7 if you aren't already, I think that is more secure as well. Essentially IE6/6.5 is a haven for viruses.
Firefox WILL run on your computer, so don't worry about that. I was running it on a 400MHz computer for a while and it was totally fine.
And in general, I recommend NOT using P2P services like LimeWire or anything like that. Instead just use utorrent and the tracker sites like snarf-it.org.