make ENV=arduino LED_DATA_FLASH=1 LED_START_FLASHES=3 LED=B0 BAUD_RATE=115200 atmega328
So, where are you executing this command? And what are the results?
For instance, you also say:
/home/otto/Downloads/arduino-1.6.5/
But I don't think that the ENV=arduino thing works with 1.6.5...
avrdude -c usbtiny -p m328p -U flash:w:optiboot_atmega328.hex -v
And what's the output from this? It doesn't program the fuses, but if you started with an Uno and can use the stock bootloader, that should mean the fuses are OK.
Do you see the initial three blinks when you press reset or start an upload?
when I try to upload a sketch using the arduino environment I am getting
The "not in sync" error is pretty worthless error messages go. 
Can you turn on verbose uploading and report the output from that as well?
I haven't actually tested the patch I suggested, on a real Uno or otherwise.
(and yes, this should probably be a new thread.)