I'm having exactly the same problem with this watchdog... It started this night and i'm using my Ipad to get some info on the net.. The point is that I can't get access to my desktop at all, but still hearing those windows sounds that it is running anyway..
Since last week AVG was asking to install a new version, but I was always in hurry and close that many times... This night, the PC was in suspension, and turning back the screen was not activaring (but the PC was running).. Then, after rebooting, all I got is this watchdog DOS screen..