SPI device prevents ISP programming
You have to prevent any other device from driving the SPI lines during programming.

To avoid driver contention, a series resistor should be placed on each of the three dedicated lines if there is a possibility that external circuitry could be driving these lines. 

 

Take a look at Application note AVR910.


  To avoid problems, the In-System Programmer should be able to keep the entire Target System
  Reset for the duration of the programming cycle. The target system should never attempt to
  drive the three SPI lines while Reset is active.


So it would be best if the reset lines of the ATMEGA and the display are functionally connected to prevent the display from doing anything while the programmer holds reset.