I'd love to give this a try but unfortunately the code won't compile (Arduino NG w/ATMega168).
The code includes the header "pins_arduino.h" which I can't seem to find anywhere. I even tried googling for it with no luck.
Also, your page in the playground doesn't detail which input the "turn this chip into an arduino chip" button should be connected to.
Edit: I'm using Arduino-0007 on OSX. I found a "pins_arduino.h" in the CVS so I'm guessing that you developed for Arduino-0008?