After digging through the forums for awhile, it looks like the problem is caused by the new version of AVRDUDE in 1.0
The previous version of AVRDUDE was a custom Arduino version that handled the DTR toggle that is needed to reset the boards before upload.
With 1.0, the IDE now uses the regular version of AVRDUDE that handles the DTR toggle for the UNO type boards, but does not handle the toggle for the boards that use the STK500v2. The Mega2560 uses the STK500v2 protocol.
Some users have replaced AVRDUDE in the 1.0 IDE with the older version from 23 or 22 and are now able to upload successfully.
See this post:http://arduino.cc/forum/index.php/topic,83079.msg634191.html#msg634191