Programming arduino with FTDI usb to serial converter

I have a breadboard arduino set up that I was hoping to program with a usb to serial converter like this one:

http://fasttechcdn.com/products/131/1319700/1319700-6.jpg

Here is the arduino circuit I'm using:

I'm using an atmega with a preloaded bootloader from Jameco. It seems to be working, I programmed the blink example with my other arduino onto the microcontroller and it works fine in the breadboard circuit. I can't seem to reprogram the chip using the usb to serial converter though. I have it set up to connect tx to rx and rx to tx. Should CTS and DTS be connected to anything? Every time I attempt to upload I get this error:

avrdude: stk500_getsync(): not in sync: resp=0x00

I have tried uploading with every programmer option. The TX light on the ftdi board blinks 3 times and nothing ever gets uploaded.

The drivers are installed fine and my computer recognizes the converter. Is there some special setting in the arduino software to program the chip with a converter like this?

Thanks!

edit:

It's probably worth noting that I'm using windows XP and arduino 1.0.1

Need to get Reset asserted when the IDE shows “compiled xxx of 32xxx bytes”.
Usual way is with DTR from FTDI chip going thru a 0.1uF cap to Reset pin on '328P chip.
Or add a button and do it manually.
May have to try a couple times to get the timing down.

Thanks for the reply, CrossRoads. I placed a 0.1 uf cap from DTR to the reset pin, and the software is now definitely resetting the arduino. There is still an out of sync error though. I forgot to mention that I am using a 15 mhz crystal because I don't have any 16 mhz around, would that cause any issues?

Which programmer should I select in the menu for the FTDI converter? Or does that not matter much?

15 MHz will be an issue. Baud rate has to be matched between PC and USB and UART on the chip.
15 MHz prevents data rate match between UART and FTDI or equivalent chip.

The FTDI converter is not a programmer type - it is a serial interface adapter.
Programmers connect to the ICSP header.

Ah, of course I'd forget to order one of the most important parts! Thanks for the help, I'll be digging through my broken electronics for a 16 mhz crystal until my next parts order.

Or 8 MHz.

Awesome, found an 8 MHz and got it working. Had to select an 8 MHz board type, of course.

Cool.