I have made a standalone Arduino with a smd atmega 32 tqfp with 22pF caps and 16 MHz xtal etc.
Basically it's the same component setup that's done for the DIP version on a breadboard (including a 0.1 micro Farad cap on the reset line for auto reset when uploading a sketch).
I'm using the Ladyada USBTinyISP (V 2) to try and burn the bootloader, but am getting "avrdude: initialization failed, rc=-1
Double check connections and try again, or use -F to override
I've checked the connections with a continuity tester beep using a multimeter etc and double checked the SPI hookup referencing http://arduino.cc/en/Reference/SPI
and the datasheet link here: http://www.mouser.com/Search/Refine.aspx?Keyword=556-ATMEGA328P-AUR
I'm powering the circuit with it's own 5v separately via wall plug.
The USBTinyISP's 6 pin output cable header (with the red cable indicator as '1' in the 6 pin config) is connected to MISO (pin 16 = D12), MOSI (pin 15 = D11), SCK (pin 17 = D13), Reset (pin 29 = reset) and the ground to the circuit ground.
I've selected USBTinyISP as the programmer and 'Arduino Pro or Pro Mini (5V, 16 MHz )w/ ATmega328' as the board.
I tested the USBTinyISP itself and it burns the bootloader with no problems on a standard factory made Duemilanove.
I also tried uploading with the reset from the USBTinyISP connected to the reset line without the 0.1 uF cap with the same error.
I'm using Arduino IDE 1.0.1,
Any pointers greatly appreciated!