Connect Rx and Tx in the common way. AN example of connection is in:
http://www.atmel.com/dyn/resou...ctions.pdf
You might also want to check out Jon Ledbetter's RS232 kickstart document to troubleshoot your RS232 connection - the principle is to short Rx and Tx together at various spots - PC connector, end of cable, after the level convertor - and check if you can obtain echo in the terminal program.

As for /PSEN, the abovementioned Atmel AN contains also a "auto-isp" circuit where FLIP would take care of resetting the mcu while holding /PSEN down, but I simply attach a pushbutton (or even only a single wire) to /PSEN to hold it to GND manually while resetting/powering up the circuit. In doubts, I usually don't use FLIP or similar - relatively complicated - program, but the simple terminal emulator (my favorite for this is terminal by Bray, which can automatically send out a "macro" - I set it to send the 'U' character each 100ms).

Jan Waclawek