This bunch of code can be used to test UART or RS232 (depending on your circuit).
I use https://sites.google.com/site/terminalbpp/ as a windows terminal.
Compile and flash this code and your microcontroller will tell you that its running via UART. You can then send it a request (ending with a character return) and it will respond with the baud rate register value (just used as an example).
The archives below have all the source code that you will need to get basic UART running on your ATmega128.