One day, I took the ATMEGA out of my counterfeit UNO and put it into a breadboard. I wired up a LM2576 to it, and powered it up. It worked! (after I added a crystal). So I started experimenting with this setup, and decided to try the "self power-off" idea using the ON/OFF pin on the regulator. And poof- the regulator smoked and shorted out, and goodbye to the chip!
The regulator had let the full 12v, 1A current pass through the chip, killing it instantly. But that's not all- the chip still programs with ISP but does not respond with serial. And the code doesn't do anything. So what's wrong with the chip? (The whole fake cost 8$, so not much lost 
)
-Isaac
You buy a new board from a supplier that supports the Arduino that hosts the site. (there's been a split, official boards maker partner broke with, does not support the software side of the company.
You buy some blank 328P-PU chips if you're going to 'eat' chips and bootload them.
Everything you need, step by step, multiple ways like 3.3V 8MHz no crystal operation.. At 3.3V you can interface directly to 3.3V devices, a 5V board needs voltage leveling.
The Mighty 1284P is also given treatment. Want an AVR with 16K RAM? I get them down around $7 each plus shipping. It's pretty loaded for not having to deal with SMT.
GoForSmoke:
You buy a new board from a supplier that supports the Arduino that hosts the site. (there's been a split, official boards maker partner broke with, does not support the software side of the company.You buy some blank 328P-PU chips if you're going to 'eat' chips and bootload them.
Gammon Forum : Electronics : Microprocessors : How to make an Arduino-compatible minimal boardEverything you need, step by step, multiple ways like 3.3V 8MHz no crystal operation.. At 3.3V you can interface directly to 3.3V devices, a 5V board needs voltage leveling.
The Mighty 1284P is also given treatment. Want an AVR with 16K RAM? I get them down around $7 each plus shipping. It's pretty loaded for not having to deal with SMT.
I've been meaning to try the 1284 chips. The RAM would be nice, however it can replace my Mega project and run at 20Mhz which is great for LCD intensive stuff.
I offer '1284P boards in several form factors, can leave the 16 MHz crystal out and you can install your own.
http://www.crossroadsfencing.com/BobuinoRev17/
I chucked the dead AVR and bought a new 328-PU. I changed the device signature and now ISP works but serial upload doesn't. What could be wrong?
You need to burn the bootloader!
Loading a program with ISP removes the bootloader.
So I am not at all sure from what you said, that your original chip was in fact, dead.
OK. I solved it. What I had been doing to burn the bootloader was, since the chip is a non-p version just copying the avrdude command from the IDE. All that does is set the fuses. Anyway, I have done it properly by changing avrdude.conf.
That's not how you overclock an Atmega!
The board might be counterfeit, but the chip was genuine. So, unless you have destroyed the board, you possibly destroyed the only genuine part on it.