> Also there is a lot of re-familiarization with Atari ST programming.
If you'll make your interface compatible with ICD host-adapters, then you don't need any ST programming - just use original drivers for hard-drives.
> I'm even lucky enough to have a ISP that ATMEL gave to me for free!
The simpliest AVR programmer is just 4 wires from LPT port of your PC ;-) Little bit complicated programmer can be built at the price of 3 USD.
Even thought, you got a lot work in front of you ;-) I'm on about 90% of the hard-drive functionality (HDDRIVER recognizes the drive, can read and write sectors, but has some trouble with partitioning and formating the drive).