This is definitely it! I intercepted the command being generated and updated the baud rate in there from 9600 to 19200, see below, and IT WORKED!!! So how to i make the IDE use a baud rate of 19200 when generating these command lines?
C:\arduino-0022\hardware/tools/avr/bin/avrdude -CC:\arduino-0022\hardware/tools/avr/etc/avrdude.conf -v -v -v -v -patmega328p -cstk500v1 -P\\.\COM5 -b19200 -Uflash:w:C:\Users\Sean\AppData\Local\Temp\build3447786868117704274.tmp\Blink.cpp.hex:i
My boards.txt is below and contains the 19200 baud.
atmega328Pbb0.name=ATmega328P @ 1 MHz (external oscillator; BOD level1)
atmega328Pbb0.upload.using=arduino:arduinoisp
atmega328Pbb0.upload.maximum_size=32768
atmega328Pbb0.upload.speed=19200
atmega328Pbb0.bootloader.low_fuses=0x4c
atmega328Pbb0.bootloader.high_fuses=0xD7
atmega328Pbb0.bootloader.extended_fuses=0xfe
atmega328Pbb0.bootloader.path=empty
atmega328Pbb0.bootloader.file=empty328Pat1.hex
atmega328Pbb0.build.mcu=atmega328p
atmega328Pbb0.build.f_cpu=1000000L
atmega328Pbb0.build.core=arduino:arduino
atmega328Pbb0.build.variant=arduino:standard