The Arduino Mega auto resets when the serial port is connected. Since this occurs whenever the PC establishes a connection, the Mega was resetting when attempting to upload the code to the Rainbowuino. This in turn causes the Mega to go into programming mode and the Rainbowuino is not seen.
To overcome this, you need to place a 47 ohm resistor between 3.3v and reset on the Arduino Mega board. This will prevent the Mega from resetting when you attempt to upload to the Rainbowuino. The upload via the Arduino GUI will now work and you will be extremely happy.