Thanks for those diagrams of the voltage regulator. I'm still getting 2 different stories about the capacitor sizes though, I had copied and pasted from the reference and it said a 10uf and 1uf, and "retrolefty" mentions a big and small cap, but "pluggy" said he read in the reference somewhere that its 2 10uf ones, I've also heard other sources seemingly using 2 identical ones. Does it work both ways, or is one method better?
The capacitor sizes for the regulator input and output are very non-critical. However, rather then expecting someone on the web to give you the 'perfect & exact' (or even a correct answer for that matter), you should do what most of us do, get a copy of the chip's datasheet and see what it says and recommends. That is always the reference one should go by.
Here is a link to the original national LM7805 fixed +5vdc regulator. On the very first page there is a picture showing input and output caps with notes about there usage. That input cap is shown as .22ufd, but larger is fine. The output cap is shown as not required, but .1ufd suggested. For use with digital components like the 328 chip, It's common practice to wire .1ufd caps between +5vdc and ground at various spots on your board, best location being right at the +5vdc power pins for your AVR chip, pins 20 & 22. Digital circuits create noise on the +5vdc power bus and power bypass caps are your best friend to help prevent strange problems.