Figure out how to flash the Rainbowduino...hopefully this will help other folks who may be having the same issue...
Using an Arduino Uno I did like you suggested and carefully removed the chip from the arduino board. I then connected the two boards in the following manner...
Rainbowduino I2C Bus -- Arduino
I2C Data (SDA) -- Arduino Analog Pin 1
I2C Clock (SCL) -- Arduino Analog Pin 0
GND -- GND
VCC(+5VDC) -- VCC
TXD -- Arduino TX, Digital 1
RXD -- Arduino RX Digital 0
DTR -- Reset
After cable the two units together, open the Arduino IDE and select the "Arduino, Duemilanove, or Nano w/ ATmega328" board.
You should now be able to flash the rainbowduino with a new firmware.
Thanks to the guys at the following link as well as Madworm for the help.http://www.milesburton.com/wiki/index.php?title=RainbowDuino_Via_Serial