diy atmega8 arduino not uploading. please help!

Well that is unfortunate. Lets try a manual reset. When you press the upload button and the IDE compiles the sketch, press and hold the reset button down until the Binary Sketch Size: 1,234 bytes appears in the IDE window and then release the reset button. There is a fussy timing of this, so a few tests may be needed (delaying release 100-500ms after the Binary Sketch Size). Some people prefer just pressing it when the Binary Sketch Size appears.

It is a little easier with both RX and TX leds.