Connect the grounds!
Sorry, which ground do you mean?
The LED has a built-in resistor.
Where should I put bypass caps?
The ground for the FT323RL and the ATmega ground. The ATmega cannot communicate with the ft232 without a common ground. This is true of all circuits, except where an opto-isolator is used (then the communication is done with light).
Really? Really really?The ATmega has two Vcc pins and two ground pins. All 4 should be connected. For each Vcc pin there should be a 0.1uF ceramic bypass cap placed as close as possible to the Vcc pin, between the pin and ground.
Technically, do we need to put 0.1uF capa at Pin-20?