I'm starting to get the impression that the SparkFun processor is defective.
Does your Sketch use the EEPROM?
Not that I know of. I don't have any read(), or write() functions in it.
The Sparkfun m168 "seems" to load the blink sketch ok, but nothing more complex?[/edit]
I did a test on the first page and the sparkfun processor did not have any problem running the blink sketch while outputting messages to the LCD.
However, if the Bootloader verifies the uploaded Sketch then my theory is trash.
Where would I see this? The arduino software doesn't give any errors when uploading.
The only thing I can think of is that something in the fuse settings is different on the Sparkfun chip than on the one from your Arduino. Either the Crystal Oscillator settings or the BrownOut detect could cause such failure to operate, I think. How sure are you of of the power supply and crystal circuitry on your external circuit?
I'm fairly certain my power supply is ok. I'm running it off a 12v sealed lead-acid battery, and there are caps on both the 12v and the 5v lines (as seen in the standalone arduino tutorial). I setup the crystal just like in the tutorial too, with one 22 pF capacitor running to ground from each pin.
I picked up a second sparkfun processor and i'm still having the same problem, so I don't think it's a defective chip.