Step 2: Time to Burn the bootloader
Ex. for my Atmega328 chip and an external 16MHz crystal i chose: Arduino Duemilanove or Nano /w Armega 328 ( see pic 1 )
Picture 2: Goto Tools -> Burn Bootloader -> w/ Arduino as ISP
The board will begin bootloading.
Picture 3: When bootloading is successful you can enjoy your new homemade Arduino.
If you get errors :
1. Make sure you selected the correct board ( Picture 1 )
2. When getting this error: avrdude: stk500_getsync(): not in sync: resp=0x00
You did not put an 100nF capacitor between +5v and RESET pin on the Arduino Mega 2560
3. IF you still get another error search on google
4. If you still find no solution goto arduino forum : http://arduino.cc/forum/index.php/board,67.0.html
and post your problem + a link to this instructables.