I got it working in about 5 minutes by hooking up a wire from PWM Port12 to the RESET Port. On the Arduino I checked for the text RESET on the incoming SerialEvent3. When RESET is found do: pinMode(7, OUTPUT); digitalWrite(7, LOW); As for as the C# it was as simple as:
if (serialPort1.IsOpen) { serialPort1.Write("RESET"); }. Reset seems to work as expected.
The AVR datasheet and related application notes are pretty clear that driving the reset pin from a digital output pin is not recommended practice and can result in incomplete hardware reset function. Upon reset first all I/O pins are defaulted to input mode thus removing the active low reset signal. This results in a reset pulse width too narrow to accomplish a full proper reset. So use at your own risk but it's something the chip manufacture explicitly states you should not do.