The LD1117 3V3 regulator needs at least 4.3V at its input to be happy (as it has got 1V dropout voltage)- do you think you have enough voltage available there (at the LD1117 input) when powering from USB?

PS: Farnell lists 4286 items when asking him on "LDO Voltage Regulators"
So I would recommend you to opt for something with 0.2-0.45V dropout voltage. Such an LDO would fit nicely into your design

D2 - cathode shall be connected to the INPUT of the voltage regulator (not to VIN)
D3 - cathode shall be connected to 3.3V
LD1117 - not sure it is a "low dropout" regulator, you may use other ones instead (with 0.2-0.45V drop)- for example LE33, LF33, and tons of others..
R1 - 10k - seems to be quite a big guy, for 3.3V I would go with something like 2k2-3k3..

We strongly recommend building ArdOS projects using Atmel Studio 6 instead of the Arduino IDE

Is that a must?

I tried connecting the "IN" pin of my 386 to the speaker terminal of the ISD1820 via. a 10 uF cap. but this had no effect.

Does you 386 amplifier work? (when you touch the IN input with screwdriver (and set max signal with the pot-trimmer) you have to hear the hum from the speaker).
Do you have grounds connected together?

Try to connect your speaker to the "speaker" terminals of the ISD.

I'm not sure where the power amplifier you are referring to is on the ISD board.

The link you have posted lists:
.On-chip 8Ω speaker driver
That is the "power amplifier"
On the schematics there you may see an 8ohm speaker connected to the chip.

THe ISD module includes a power amplifier already - see the speaker output terminals.
You may connect your 386 amplifier (its input) to IDS's speaker output terminal (it does not matter which one) via  10uF capacitor, for example.
Connect the both grounds together as well.

Also mind the input capacitance (gate-source) of this transistor is 1.7nF.
So based on what current you want switch and how fast, you should consider that (it creates heat).

What about this (no current when not pressed)
As a bonus you may press several buttons at once in order to get various combinations..  

I would connect AVCC to Vcc via 10uH-100uH inductor (resistor-like package) to filter analog better.
Some people recommend smaller cap for Aref (1-10nF) - the reason is the internal 1.1V reference has output impedance about 35kohm so it takes time when switching internal ref on with 100nf (~15msecs).
When you fix the 100nF values in the eagle, then we understand it

One thing outstanding is the stuff with USB_5V connected via diode D2 to 7805 output. No idea how the good old 7805 behaves when, for example, VIN is off and USB_5V is 5V.

[mind this is not the proper engineering design practice, however]

How much higher does the driving voltage have to be in order to control 4V?  How about 3V?  Where's the cutoff point where an NPN will work?

The NPN bipolar transistor is current driven device. Talking voltage is a simplification.

Long time back I showed you the equation for nchannel mosfet (ie IRF530) - that is a a device which is voltage driven.

Vdriving = Vthreshold_nfet + Vfd1 + Vfd2 + Idiodes*R3

For example (for above schematics):

Vdriving = 4V + 2.1V + 2.1V + 0.05A*10ohm = 8.2 + 0.5 = 8.7 Volt (similar to the above simulation result, btw)..

For NPN transistor in above schematics:

1. hfe = 100, Ic=100mA, Ib=1mA
2. Rbase = (5V - (0.7 + Vfd1 + Vfd2 + Idiodes*R3)) / Ib = (5-0.7-2.1-2.1-0.5)/1mA=-0.4V/1mA = -400ohm
The above gives a nonsense for 5V, you have to use 6V for example. That is a big simplification of course, but it works.

So in order to use the high side NPN in such schematics the (0.7 + Vfd1 + Vfd2 + Idiodes*R3) should be, let say, 0.5V (or better 1V) LOWER than the max driving voltage (aprox 5V with arduino), for example (mind this is not the proper engineering design practice, however)..

Example: the above schematics with 1 diode with Vfd=3V and 30mA Idiode current:

Rbase=(5V-(0.7+3+0.03*10))/Ib=(5-0.7-3-0.3)/1mA=1V/1mA=1000ohm. So this will work, provided the arduino output can source 1mA at 5V output voltage (It means with 4V arduino's output it will not work probably)

But again, we do not talk cutt-offs or threshold voltages when dealing with bipolar transistor or other such devices (diodes, etc).

PS: the proper way of driving your LEDs with high-side switch is with PNP switch and an NPN driver - see for example:
http://forum.arduino.cc/index.php?topic=165994.0

1: If I was to go with the 5v version as it is on the previous posted layout (using 5v Vcc for the USB ftdi) what value diodes should I use
2: if I use both Vcc and Vin into 3v3 regulator, what voltage Schottky diodes should I use?

Use any schottky diodes for the current you do expect to draw. If you PLAN the max current you will draw will be for example 100mA use a 300mA schottky diode. If you plan 1A to draw, use a 3A diode. So it depends on the CURRENT.

The schottky diodes have ~0.4V forward voltage drop, while normal diodes have 0.7V - therefore schottky are better when you do not want to loose too much of the voltage.

The proper way is following:
You must know the "hfe" parameter (the gain for that type of wiring) of the 2N2222 at Ice=100mA, my estimation is hfe=100.

Then Ibe = Ice/hfe = 1mA  (this is the required base current which opens the transistor fully - it "saturates" him)

Rbase = (5V-0.7V)/1mA= 4.3kohm  (here we assume there is no resistor in the emmiter R2=0, emmiter is connected to GND).
where 5V is max output voltage of the arduino pin, and 0.7V is "base-emmiter" voltage, typically 0.7V for any bipolar Si stuff..

I've suggested 1kohm to saturate the transistor fully even when the hfe will be lower than assumed

The R2 is not required. The total current via the transistor will be 5x20mA=100mA.
You need to connect a resistor into the base - between the arduino output and the base of the transistor.
The value of 1000ohm would be ok..

See the pictures below - even with a "saturated" 2222 transistor the max current you can press through the 2 LEDs (Vf=2.1+2.1=4.2V) is about 5mA.
That is because you need MUCH higher driving voltage than 5V.
On the third picture we use 6V driving voltage in the same setup - the current through the LEDs is 50mA.
On the 4th picture you may see the circuit with IRF530 - nchannel FET. As you can see in order to get 50mA current through the LEDs you need 8.5V input driving voltage (with 5V driving voltage the current is 0mA).
We discussed this topic already, don't we?

It's done already:
http://www.touchbionics.com/products/active-prostheses/i-limb-ultra-revolution/