There's No Need To Recognize Blaster...
Basically, the problem with Blaster/Lovsan is it's a Windows Vulnerability that allows the problem in. (And by the way, AVG does indeed recognize "BLASTER/Lovsan" as a threat..) Any of the affected operating systems which are current with Windows Updates will be protected against it anyway and should have been since 2003..
And as to your examples about protection by free antivirus program, hopefully you're aware there are a number of "paid for" antivirus programs which don't correctly recognize Security Tool as well..
For those truly interested in the effectiveness of antivirus and antispyware tools, check the tests and reviews.. You'll see AVG is not useless and is better at detecting viruses and some malware than some of the "paid for" programs.. See the link below for just one such antivirus test site from November 2009.:
But please don't compare apples to oranges.. There are antispyware removal tools, vs antispyware DETECTION tools, vs antivirus removal and detection tools.. AVG is primarily an antivirus detection tool although it does have some antispyware detection and removal ability as well.. The free version of Malwarebytes is one of the better REMOVAL tools available but unless you purchase the "paid for" version, it doesn't run real-time and therefore won't "detect" the original infection process until a scan is run.
Free DOES work as long as you know its limitations.. But that's the same with any "paid for" program as well.
Hope this helps.