Here’s a little hack on HOWTO update your Arduino Chip from David Fowler. (Thanks David!)
After doing the reset mod to my Arduino Compatible Bare Bones Boards I wanted to update the firmware to get the full benefit of the Diecimila update. I followed the directions on the Arduino website but could not succeed. I sent emails and did web searches and still did not find the answer. Ultimately with the help of David Mellis, one of the Arduino Team members, we figured out that it can not be done from the IDE using the simple cable described at the Arduino web site. It can be done however and this article will give you the information needed to update or program new Mega168 chips with the latest Arduino code.