I guess this tells me the FTDI converter is OK
and the processor is toast?
No. I was unsuccessful with the PicStep.
From what I can tell, the PIC-STEP uses RS-232 for communications. If that is true, the voltage levels are high enough to damage the Arduino. Your Arduino can act as a "serial converter" but only a "TTL level serial converter" not an "RS-232 serial converter".
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