C8, C9 are wrong valuesNeed 10K pullup on resetNeed more 0.1uF decoupling caps, one each on VCC and AVCC - are you showing all the VCC/Gnd pins of the chip? I think some are missing, pretty sure there are 4 of each.Add a Gnd near PE0, PE1 for Serial comms for debugging if nothing else.Perhaps add a DTR pin to 100nF cap to Reset pin for serial code downloading. Other than that you seem to have the basics down.You've seen my MegaDip that LarryD linked to, there also my mini2560:http://www.crossroadsfencing.com/BobuinoRev17/