A couple of days ago, Brad from LucidScience posted his first attempt to generate VGA data with a AVR324, but the quality was still poor. He now added an external SRAM to the AVR, and he has plenty of space to store images. Also, he improved and added more subroutines in the firmware. The quality id dramatically increased, with 240x240 pixel resolution and 256 color depth. That is a very nice project Brad! Check it out in this link.