Oh, if you've got DWEN enabled, you can't program via ISP anymore (since the reset line is used for that) - and I think the cap for autoreset will prevent DW from working on arduino boards (per datasheet, all capacitors on the RESET/DW line must be removed). So what you've described sounds right. Why not use a well-behaved, arduino friendly ISP programmer like a USBAsp, USBTinyISP, or another Arduino as ISP, and not mess with this DW stuff? Based on what I see posted, there's essentially nobody using DW and Arduino. USBAsp and USBTinyISP can be had on ebay for about the cost of a cup of coffee.That log almost looks like it's trying to use jtag, which is totally inappropriate. DW is not supported by the Arduino IDE as the protocol is proprietary, only Atmel Studio can do that.
if you pull it from the arduino board (be sure to give it decoupling caps!) you should be able to talk to it with DW.
You *must* have two 0.1uF ceramic decoupling caps for an atmega328p in DIP package (get a bunch - you will use more of them than any other single component if you start doing electronics stuff) - one goes between Vcc and Gnd, the other between AVcc and Gnd, and they must be located right next to the chip (there are some terrible arduino on breadboard tutorials that omit these components - but this can produce random resets, hangs, and failures to program (the behavior is unpredictable - sometimes it works, sometimes it doesn't, the kind of problem that is hellish to debug) - and others that show wires leading to the caps, located off to the side on the breadboard; this prevents them from doing their job). You also need a 16MHz crystal and appropriate loading caps (typically 18~20pf ceramic), since the chip will be set up to use a crystal, and won't talk to the programmer without a clock source. There are countless guides showing the connections online.