I'm not 100% certain that this is an Avahi problem, but here's what's happening.
I'm running a fresh Debian network install on a MacBook? Pro under Parallels. When the Avahi daemon starts, the ethernet adapter loses its IP address. Here's a transcript from an ssh session:
ron@deb1:/etc/rc2.d$ sudo ./K80dbus start
Password:
Starting system message bus: dbus.
Starting Hardware abstraction layer: hald.
Starting DHCP D-Bus daemon: dhcdbd.
Starting network connection manager: NetworkManager?.
Starting Avahi mDNS/DNS-SD Daemon: avahi-daemonTimeout, server not responding.
At this point, you can log in to the console and see that eth0 has lost its IP address:
ron@deb1:~$ sudo ifconfig eth0
eth0 Link encap:Ethernet HWaddr 00:F3:70:5B:B9:81
UP BROADCAST RUNNING MULTICAST MTU:1500 Metric:1
RX packets:920 errors:0 dropped:0 overruns:0 frame:0
TX packets:581 errors:0 dropped:0 overruns:0 carrier:0
collisions:0 txqueuelen:1000
RX bytes:91719 (89.5 KiB) TX bytes:98437 (96.1 KiB)
Interrupt:10 Base address:0x1080
