Make sure you have the latest version of Aali's driver.
Make sure you put the files in the right directory.
x86 - C:\Program Files\Square Soft, Inc\Final Fantasy VII
x64 - C:\Program Files (x86)\Square Soft, Inc\Final Fantasy VII
Double-click on FF7Config.exe. Click on the graphics tab. Under Renderer, select Custom Driver. A window should pop up saying the self test was passed.
Then try installing Avalanche again.