By default AVG shouldn't install on the recovery partition, so that is unusual.
The recovery partition should be write protected and nothing should be able to install or write to it. This is to prevent anything that corrupt your back-up from getting there (malware or incompatible programs / drivers etc).
Your operating system resides on the C drive / partition? This is where the windows folder, program files etc all are?
You have downloaded the AVG install file to the C partition?
In any case when you double click the install file and go through the process there at some point should be a prompt asking you where you would like to install the program (about 3 clicks through). When you are prompted with this you should click the browse button and navigate to C:\Program Files. This is the proper location for the install (if it is 32 bit).
If you are running a 64 bit operating system the install location will be C:\Program Files (x86). If this folder isn't there the operating system will be 32 bit.
Hope this helps.