Wow! This is exactly the feedback i had hoped to get!
Thank you all! you really do make this a great community for those trying to learn as much as they can about micro controllers and electronics.
@zageek and retrolefty. Thanks. I saw that about 5 min after i posted this 
And yeah, i feel dumb.
@zageek: thanks for this!
I am a bit busy at the moment, but here is some more information.
the RFID reader i am using is the parallax RFID reader. It does a lot of the work for me... i get a single 2400 baud serial out signal.
i take Senable pin LOW to enable the reader (tell it to start searching for tags) and take it HIGH to put it in standby mode.
Yes, i have already written most of the software; it works with the reader.
What did you mean when you said i could use the serial receive pin? i thought PD0 was the serial receive pin.
and as for the power supply, i will probably be some sort of wall wart fed into this little guy: http://www.tkk.fi/Misc/Electronics/circuits/psu_5v.html
the standard 7805 based circuit; i would put it in the schematic, but i cant find a library that has it in it Eagle's libraries are annoying!
since the caps are already in the circuit, can i get away with not adding the additional ones?
and yes, i hope to turn this into a PCB, but i may just use some simple hobbyboard with the traces already done in rows.
the main logic will be far enough way from the RFID and the 120V to DC circuitry so i dont think ill have too much interference to worry about.
THANKS SO MUCH FOR THE HELP!