On my custom made PCB the RST pin is decoupled to ground with a 100nF (bypassed with a switch for manual reset) and is set high via a 10K resistor.The decoupling capacitor is there to provide a low-state to the RST pin at power-up, until the VCC stabilizes. It seems that the Arduino serial converter cannot properly reset the target board. Is there any need for a series capacitor? I have seen the Arduino schematic and it's already there...
Thank you for the tips. I have removed the 100nF cap and now it is working good. I haven't connected any series cap because it's already on the Arduino.
Another quick question: I don't have any AVCC to GND capacitor. How this can affect the ADC performance? I'm using all eight ADC inputs.
Just remember that you will need that series cap if using a separate USB>Serial adapter, if it doesn't already have one; e.g. most PL2303 or CP2102 modules.