hi
Without looking at whether the multiplexer circuits are correct, I can see the big probelm is current drive... the problem you will find with that schematic is that essentially you're using the Atmega8 to provide current drive for the segments. this means a maximum (before thie chip melts down!) of 40ma from the PWM pin; divided by 8 that makes 5ma per individual led colour, 15ma total per led. In sum, it's not goign to be very bright, especially when yo're multiplexing it as well! You should try using some driver transistors with appropriate resistors for each led column... have look at
this diagram and you'll see what I mean... instead of using the PWM pin as the current source, you need to use the pwm pin to drive trnasistors that switch on much greater currents.
D