Thanks for your reply. I am getting back to this project after a very long delay!
In my application VIN = 5V. So I will need the regulator to generate 3.3V. The diode between VUSB and VIN is D2 and I see how it works provided that VIN > VUSB. But, ignoring the diode drop, when that is not the case then the VIN supply will be driven hard by VUSB.
I figure that to be safe I would have to disconnect D2. Alternatively, when a sketch is uploaded then VIN should be disconnected. Is there any other solution?