I have this problem, also, but only when using the Arduino as the programmer. When I use my AVRTinyISP uploads work just fine. My arduino board beagn with me as one with a fried processor, which I replaced with a sample. I downloaded all of the Arduino environment and drivers, purchased and used a AVRTinyISP to upload the Boot Loader. After which I uploaded the Blink program, all using the 6 pin ISP connection. But when I the attempt upload using the onboard USB interface I get the red message shown in the subject line, above. I worked to finally get the serial port to be correct, but the upload still fails. Everything about the setup, drivers, etc. is correct. Then I saw a mention in a post of enabling the use of verbose output during upload and the shift ket while pushing the upload button. The only strange thing that appears in the verbose output is the message of "overriding baud rate :19200". This is odd because I know that the COM channel is set to 9600. It would appear that the arduino environment is searching for an understandable response from the board during upload and it's changing the baud rate to do so. I imagine when it gets a response, ascii characters, but does not recognize them, it quits, printing the avrdude stk500... message. It could be that the serial input pin on the FTDI chip is blown, probably during the same event that fried the processor, also hit the FTDI chip, but limited only to the serial input pin. Pleas give you comments if this diagnosis makes sense or not. meanwhile I will try ti get a replacement FTDI chip.