Are you using Wire library to talk to the driver? If so, Wire uses a 7-bit slave address - this causes some confusion. Also, the I2C SDA and SCL lines may each need a pullup resistor to +5V - 4.7K will work. Wire uses the hardware I2C of the 168, so your SDA and SCL lines are Analog 4 and 5.
The only way I know to diagnose what is happening on the data lines is to use an oscilloscope to look at SDA and SCL. If you trigger on SDA going low you can see the address going out on SDA, and if it stays low during the ninth SCL pulse, that's an ACK. If you don't see an ACK, the slave isn't recognizing the address.
P.S. I found this helpful: http://research.techkwondo.com/blog/julian/279