Since you're into building your own boards based on one of the 128k AVR's I would get a "real programmer". The USB Tiny is a big mess, both hardware and software wise. As it is now you really don't know whether the programmer is at fault or your board is. Get an AVRSIP MKII using the Stk500v2 protocol. If you think the Atmel version is too expensive to justify, you may look at eBay for Chinese copies.
yep, I thought that first thing. I have ordered a http://www.atmel.com/dyn/products/tools_card.asp?tool_id=3808
I have gone over the board several times and can't find anything that would cause the error. I'll post the issue if I find it.
That's quite neat Good work.