Yeah I realize the schematic isn't clear. The LCD is removed for programming via ICSP header. The schematic is correct. All nets are going to their respective pins (MISO, MOSI, SCK, etc).
I did figure it out tho. The problem is with the reset. I shared the reset pullup and inline cap. Turns out this doesn't work with the ICSP header using an Arduino as ISP. To test this theory I soldered a piece of wire to the trace between the MCU reset pin and the pullup resistor effectively bypassing the cap. I removed the reset wire from the header plug and soldered it to the wire I put on the trace. Bing-bam-boom it worked the first time. So there must be a difference in the way the FTDI DTR handles reset as compared to ICSP. Lesson learned.
This is a custom board that I etched. It still a prototype and certainly needs some refinement.