That rat nest of a tutorial is hideous. I'll attach a picture of my setup its simple. I removed the 5V regulators and only rely on usb power, and I attach the breakout board manually. Ive checked the board against
http://itp.nyu.edu/physcomp/Tutorials/ArduinoBreadboard/
& the atmega datasheet.
they are right.
Will FTDI even work with optiboot?
I am a little confused with "an LED built into the bootloading process". First I burned the bootloader, and then I held Shift+CTRL+U to upload to the board with the programmer.
There is an LED on the board. I hooked it up to atmega pin 3 for blink test and pin 15(PWM) for the fade test. Everything is perfect with the ISP alone. I do not however have an led hooked to the default arduino 13pin(aka pin 19 on atmega328).
The board should be boot loaded properly because I could not correctly upload sketches when I tried without burning the bootloader (blank atmega328 chip). The led would blink oddly but would ignore code when I tried to change the duration.The fade sketch would not work at all.
and again I did try the FTDI with the duemilanove bootloader and it was still out of sync. Would you recommend a different board type/bootloader?
I got a few other things to try. I'll keep tinkering until I hear back from you. Thanks btw.
ps. I bookmarked a page on 1284ps. I may end up needing 128k flash for my garden control system 
much love! I was planning on using two 328ps if i went over the 32k flash x-( no bueno
