I had similar issues but resolved all of them, eventually.
I suggest to look at Adafruits usbtinyisp articles and make sure you are using the correct driver.
There is one for a 64bit operating system here http://www.ladyada.net/make/usbtinyisp/download.html
I can tell you it works for Windows7. This driver has the correct date stamp(after Win7 was released) contrary to another driver out there that predates Win7's release - and will not work.
The 32bit driver is on the same link as above and first up on that page.
I also bought a few of Sparkfun's usbtinyisp's which Limor Fried helped co-develop - they are already assembled.
I still use Arduino IDE V23 as V1.0 has code syntax changes and other issues that are not backward compatible with many programs V23 and before, so instead of rewriting all your code, just get up and running with V23 first.
Another tip - when plugging your Arduino in to the ICSP cable make sure the cable runs across the board(not to the outer edge). Yes it's nonsense but that's how they wired up the ICSP plug to the usbtiny.
Now if using IDE V23 find and open the Preferences.txt file and edit the line which says upload.using=usbtinyisp (line 24 of the code).
The default is upload.using=bootloader.
Save the file.
Now open up the IDE followed by attaching the usb to the usbtiny. You should see the blue and red led on (Sparkfuns version).
If you had the IDE open while trying to edit the file it won't take - close the IDE and try again.
If you are using IDE V1.0 this operation is unnecessary - but I prefer V23.
The critical part is getting the right driver correctly loaded and following these steps.
If you get it right then you can repeat the upload sketch, burn bootloader process as often as you like (good to do it a few times to get the feel of it).
You don't need to worry about Avrdude. Downloading Avrdude is not necessary if you want to upload with usbtiny. The IDE already has Avrdude.
But I have Avrdude downloaded as well.