For a 1024 word bootloader section on the 328p, the bootloader needs to be compiled such that it starts at $3C00, give it a try
Also I was pretty certain BOOTSZ0 had to be unchecked. Are you migrating from a 168? I think it was $3800 for a 168 chip ( easy mistake ), also the 328 swapped BOOTSZ & BODLEVEL.
