I know you where thinking of using an Atmel microprocessor... that is what the Arduinos are powered from(i think, or atmega? who knows lol).
Have you considered picking up an Arduino for development in preparation to moving it to a stand alone microprocessor? I really like the idea of this lean gauge and gear counter, But I lack the experience of real microprocessor programing.
The Arduino takes care of 99% of the BS that I don't want to know anyways :P
You can get alot more analog and digital terminals and there might be more community support
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