Electronic – Programmer for Sanyo LC87F5NC8A Microcontroller

This page has the circuit diagrams, C code, and compiled windows executable for using ISP to program a PIC. The (windows) software is different form the AVR software, so maybe it is just a cheap way to program PICs. Certainly cheaper than $1200.

http://elm-chan.org/works/avrx/report_e.html (near the bottom)

This seems to be a generic FT232 breakout board. LadyAda has documented a way for using one to program an AVR chip (using avrdude). But it is really slow, and requires patching the avrdude software. So it is useful for writing a boot loader to the AVR, which you then can use for uploading your programs.

There is another guide which also provides some precompiled software based on avrdude (but as usual, beware with such software, and use a virtual machine to be sure).

But this only provides a way for programming the AVR. You don't get debugging capability that way. OpenOCD provides preliminary support for the 8-bit AVR family, so you might want to try this. The OpenOCD configuration is already provided with the programmer you linked to.