I'm into checking the board against the schematics. I'm trying to take baby steps so I've started with all of the components that connect to Atmega that deal with programming it.
So I've check the keyboard, ISP cable header, and USB power, and their connections to the Atmega32. I've double checked VCC and AVCC from USB, gnd, Atmega crystal, and ICSP all appear connected (continuity) to Atega32 properly. I'm not able to check total continuity from the right keyboard button to the Atmega due to the 1N4148 but did check continuity from the right keyboard to the 1N4148 and then from each 1N4148 to the respective pin 6 & 7 on the Atmega. As best I can tell at this time all of the physical traces/pins that are required to program the Atmega have continuity and no shorts with other components or traces. The only things I cannot physically test are the actual functionality of the 1N4148 and the 16Mhz crystal.
I'm assuming the crystal would be the first thing to check. The best I could do is swap it for a 20Mhz to see if it would allow PonyProg to communicate with it. Does that sound like the most reasonable next step?