pcfr33k:
On the FTDI device its called RTS so disconnect that and use the reset switch that came with the kit?
RTS or DTR doesn't matter. However if there isn't a 100nF cap between the signal and the RESET pin of the ATmega328 and a pull-up resistor between the ATmega328's RESET pin and VCC, then the chip won't come out of RESET and won't respond to programming.
pcfr33k:
DO I need the Caps like they show on the diagram for the crystal? That would not be the reason for the sync error would it?
Sometimes you do, sometimes you don't. With a breadboard there might be enough stray capacitance that you don't. If there is a bootloader already programmed on the chip and it runs without the caps then you don't need them. (e.g. Put the chip in your Arduino, program blink, then put in the breadboard. If pin 13 toggles, then it is working.)
pcfr33k:
When do you reset manually before and after the successful upload of the sketch?
You have to time the RESET just before avrdude tries to start programming the chip. You must reset the ATmega328 so that the bootloader runs and can talk to avrdude.