They reckon that have got a boot loader on it
1. Have they tried their programming environment with an actual, pre-bootloaded, real Arduino 2009 board?
2. Have they tried swapping the bad ATMega with the one on the known good board (assuming it is swapable, of course).
Your saying "they reckon" throws a big red flag up for me; I am sure it could be other issues, but this one would be among the first things I would check.
You didn't mention anything about how they got the bootloader (or if they put one on) onto the chips or such; with the parts you mention they are programming the board with, I don't think you can get it on that way. Where did they get the chips? Did you supply them with the pre-bootloaded chips? Did they get them bare from Atmel? Did they get them from another source?