I'm not convinced that the programming arduino is hooked up correctly to the target. if it is correctly connected, could there be anything else connected to the target chip that would interfere? for greatest comfort I would make sure that there was nothing on the programming lines.
Can you try running avrdude directly from the command line? It's easy to get extra info that way using -v -v on the command line.
I have built a couple of arduino-based programmers but and i know they can work but it was never very satisfactory. for a christmas deadline you might consider breaking down and spending $20 on a programmer.