vishalapr:
Do I just set up the schematic shown on the first page?
I don't know. I've never used the technique. I just know of its existence.
And thanks for the updated ISP for Arduino 1.0
You are welcome.
Just out of curiosity, what changes to the ISP did u make? Are they big or small changes?
Many. But I believe the one that overcomes the bug is: The LED handling was changed to "blink without delay".