Hi,
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Will these 2 programs interfere with each other?
Not normally, just don't scan with boths programs at once. You may also get a "double hit" where one of the programs might detect a virus (etc) in the other program's quarantine folder.
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How goo/effective is the anti-virus built into Ad-Watch? Does it scan incoming / outgoing emails?
I, personally, would use AVG's resident sheild over Ad-Watch. I find Ad-Watch a bit awkward to use and no it doesn't scan emails (whereas AVG does).
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Is Ad-Watch an effective enough anti-virus engine that I can get rid of AVG?
No. I (again, this is my opinion) would use AVG resident sheild and use Ad-Aware (with heuristics and virus scanning turned on) as an on-demand scanner.
I hope that makes sense, post back and let me know,
Casey