FTDI Friend constantly resetting

Hi all - I added the pins to a breadboard to program the chip with FTDI Friend instead of a Mini USB adapter

Once I got the wiring set up correctly, it is working just fine to auto-reset, and upload sketches. My issue is this - after the upload completes, the sketch runs as expected. When I disconnect the Friend (thus powering down the board) and then reconnect it, for some reason it goes into reset-after-reset - the sketch will not run. I have an LED on pin 13, which just flashes quickly 2/3 times over and over, just like when reset button is pressed.

There's a lot of pages about the correct wiring, here's one I mainly used:
http://thecustomgeek.com/2011/12/07/get-on-board/
last post at the bottom

OK - dumb question... I'm using the Friend as the power supply to the board when it's plugged in (powered from USB port obviously), and not plugging in the "normal" DC power supply when the board is powered standalone. Do I have to hook up BOTH the Friend AND the DC power supply? I assume this will damage things...

Thank you.

Try adding 0.1uF caps on VCC, AVCC.

Power comes from the module on the left when the FTDI is not plugged in?
Put a meter on the VCC, AVCC pins, make sure the 5V is coming thru ok.

Thanks! Yes, board power supply on the left, unplugged. Tried the caps, still resets. I used my meter probes on VCC pin 7 and AVCC pin 20 and show 4.98-5.01 V. It still resets. Has me baffled!

You also have Aref connected to +5. Remove that, should only be a cap to Gnd on Aref.
Outside of that, I don't see anything obviously wrong.
What's the value on the blue cap?
Check the level on the reset pin too, maybe it's getting pulled high very well.

Or your switch needs to be rotated 90 degrees.

Blue cap is 0.1uf

Just for my curiosity - this page shows a jumper from + voltage to the AREF pin 21. Is it not required?