MCP2221 USB To UART Programmer
Looking at my design I have connected the reset pin from the chip through a 100nF cap to the reset pin on the atmega.


This is definitely not right.

The RESET pin on the MCP2221 is an input, not an output. The only thing that connecting it this way would do is possibly reset the MCP2221 when the reset button is pressed, causing it to disconnect from your computer for a moment.

There's no great way to hook this up, as the MCP2221 does not have any secondary UART signals (e.g, RTS/CTS, DTR/DSR). You could potentially connect one of the GPIOs to the capacitor to get the desired result, but note that this will require some software changes to the programmer to support it. A better option might be to use the MCP2200, which has RTS/CTS pins that can be used as-is by the programmer.