Hi, I was facing the some problem. Actually what happen in my case, that when i am using standalone arduino 2560, i can upload the program, but when i plugged that arduino mega to a different PCB, which we had made, we get time out error while uploading the program.
Case 1 : When i saw below refernce thread i find out this is the similar case with me. I plugged out the arduino mega from my pcb, upload the program and plug it to the pCB again. Now for the first time, i can upload the program but after then , i get the same error avrdude timeout.
Is is the case that , the extra reset pin which i had used in my PCB is casuing any problem?
reference : http://forum.arduino.cc/index.php?topic=102477.0