Is it possible my ATMega is burnt due to bad wiring?
Smoke is a definite sign something failed. The LED (power indicator)is independent of the microprocessor, it just indicates power is applied in the appropriate direction.  Go to the basics, and load the simple blink sketch and see if it works, if so you are lucky. You then might want to write some code to check all the outputs and inputs. It is possible you destroyed both devices, you need to do some investigating to determine what is still properly operating.