I did. For the first time it said the signature is 0x1e940b which didn't match the expected signature for m168 = 0x1e9406. Then I tried Nick Gammon's sketch and now I am getting 0xff0000 using the standard Burn Bootloader from the Arduino IDE (tried selecting Nano and Duemilanove as the board). I suspect it has something to do with the crystal, but i do have a 16MHz and 22pF caps connected to pin 7 and 8 so I'm not sure.
Thanks for your reply.