I would highly doubt that GOG would put any sort of bad file, virus, or other in their programs. So... yeah. Feel free to be safe unless they are trying to screw with all of us :)

The last few versions of AVG (anything 8.0+) have gone downhill from what it used to be, and I'm guessing that this false-positive is due to overzealous heuristics based scanning. I'd personally recommend switching to a different anti-virus (Avast is my free AV of choice).

I don't use AVG, but i took a look at the AVG 8.5 user manual, and the process to add an exception is the one mentioned by Catshade. Here's a link to the manual.

AVG picks up false positives with some titles. You can add it to the exceptions, or temporally turn off "Resident Shield" in "Tools > Advanced Settings".
It should stop AVG from checking every file as it is run, and instead rely on user initiated scans. Just remember to turn it back on after install.

http://www.avast.com/eng/download-avast-home.html
get the avast home edition it never thought gogwrap.exe was a virus and it includes a root kit scanner.

I have had Avast report false positives for other games, though, but not any GOG ones.

Thanks for the help everyone.
I still cannot get it to work.
I reinstalled with Resident Shield off, but AVG still picked up a different file as malware.
I added the exe files tot he PUP exception list but the game will not launch and only crashes.
I am at a loss.

I'm not sure whether gogwrap.exe is a single tool that is used for multiple games, or whether it's customized specifically for a game every time it's used.
I say that because I'm currently using AVG and have Heroes of Might and Magic, which also uses gogwrap.exe and it's not flagged.
The version info on this exe is: 1.0.47.6

Im using AVG free edition right now, no problems so far. But i've read about that it can make conflicts with some softweare ocasionally, like for eg. Steam.
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Well you might aswell try this one since it only takes a couple of seconds.
Try to add the game folder to the resident shield exceptions.
Tools > Resident Shield > Exceptions, and then mark the game folder as an exception.

I'll add another +1 for Avast! I used AVG for some time, but started getting too many false positives, so I switched to Avast! around a year ago. Since then I've had only one false positive, which they cleared up within a couple days.

After AVG became the nonsense it is today, I switched to Avast! and never looked back. It's great, and it stays out of my ****ing way.