I wish to go from an arduino board to just using the Atmega328 chip. I think i can just connect it to a 5v power source but I want it to be confirmed before I mess anything up...
Hey Brian! Not quite. Now I can't speak for the ATMEGA directly since my experience is with PICs but if I want to take my microcontroller off of the development board, I have to set certain pins high (MCLR in my case). Also, when you use the arduino IDE, your duemilanovae code will most likely be programmed into the chip assuming that there's an external oscillator attached (16 MHz). So if you just apply voltage, you won't get results you will want.
Sparkfun has a nice little tutorial on making a "breadboard" Duemilanovae/Uno using the Uno without the ATMEGA328. Take a look, and you can strip off the parts you won't need. Basically, you probably won't need the ICSP once you programmed the chip, or the buttons, power regulator etc... You decide what you want to keep.
Look up Arduino Breadboard.
You will need a couple capacitors and whatever you want to use for the oscilator - crystal or resonator. 1 10K resistor for the reset pin.
Here is a picture and listing of the parts generally used to build a standalone arduino: