Can ATmega88 be run at 3.3V with internal clock?
Yes, you can use internal clock with Mega88 + Arduino.

To achieve this, you need to burn the bootloader differently:


Download the 8MHz Bootloader
if using AVRDUDE to flash the bootloader, change the fuse settings like below:


# fuses for 8MHz internal RC Oscillator
avrdude -e -U lock:w:0x3f:m -U lfuse:w:0xd4:m -U hfuse:w:0xca:m


Change settings in your arduino environment (preferences.txt)


change      build.f_cpu=16000000L   
to          build.f_cpu=8000000L


Edit the makefile:


In &lt;arduino&gt;/lib/targets/arduino edit makefile
change    F_CPU = 16000000
to        F_CPU = 8000000