...but I'm at a loss to explain where that AC component might be coming from.
22.2 2-wire Serial Interface Bus DefinitionThe 2-wire Serial Interface (TWI) is ideally suited for typical microcontroller applications. TheTWI protocol allows the systems designer to interconnect up to 128 different devices using onlytwo bi-directional bus lines, one for clock (SCL) and one for data (SDA). The only external hardwareneeded to implement the bus is a single pull-up resistor for each of the TWI bus lines. Alldevices connected to the bus have individual addresses, and mechanisms for resolving buscontention are inherent in the TWI protocol.
While I do have the recommended filter caps around the voltage regulators, I don't have a 'ceramic decoupling capacitor' between VCC & GND on the Atmega. What purpose does this serve, and do you have a recommended value?