You've come to the right place. Atmel micros are my specialty!
I prefer the Mega8, Mega16, and Mega162 uC's, because they tend to have the best combination of built in peripherals, memory space, IO ports, and so forth for my needs. They aren't significantly more expensive than any of the other chips. But if the other chips satisfy your requirements I'm sure they'll work great.
A decent (not great, not bad) textbook is "Embedded C Programming and the Atmel AVR" by Barnett, Cox and O'Cull. It's written around the AtMega16. It shows you how to use all of the internal peripherals, which tend to work the same for all Atmel AVR uCs.
You can build your own programming cable by hacking up a parrallel printer cable and connecting it to the uC's SPI port. See here:
http://online.sfsu.edu/~meholden/Microcontrollers/avr_cable.htmland here:
http://www2.tech.purdue.edu/ecet/courses/referencematerial/atmel/I use the CodeVisionAVR compiler/IDE for writing the software. There's a free evaluation version available here:
http://www.hpinfotech.ro/html/download.htmThat should get you started. Lemme know if you have any questions. Odds are good that I've had the same question at some point, so I can probably help you find the answer.