i think i've run into the same problem.
especially concerning the leds: pin13 flashes up on reset, stays low for 10 seconds an blinks then.
when i am in "initial mode" (13 low), uploading results in TX and RX flashing shortly, in "normal" (13 blinking) mode, only RX flashes.
i've not changed any of the default settings except changing atmega8 to atmega168; running on linux with full privileges; board is new; using power from serial.
is there a "final solution" to the problems described by xibra?