I looked at the Sparkfun schematic as well as similar board from www.olimex.com/dev - AVR-P40-8515.
In both cases, they have converted DTR/RTS signals from RS232 to TTL and left them unconnected on pins. They have not connected RTS/DTR signal to RESET via a 0.1 mfd capacitor as they do in FREEDUINO Serial or SEVERINO.
If you look at the Sanguino schematic by Zack Hoeken, you will see RTS connected to RESET via a 0.1 mfd capacitor. But he uses a FTDI USB to 232 converter chip.
I wanted to try the same here with MAX232.