My LCD is now working with the ATMEGA 162 MCU mounted on my Linefollower2 robot (updated this site with a new picture). First, I had to disable the JTAGEN fuse on the MCU in order to use pins PC3 and PC4.

I recently came to the realization that I'm not going to need these wheel encoders for pure line following, but that's O.K. - I'd like to use this platform for other uses as well.