Neat! Whats the plan on interfacing with a machine controller? FYI, The mega8 has a built in oscillator, unless there is something ultra timing critical, you don't really need the xtal. Can you post a little higher resolution of the schematic? It's pretty choppy in my viewer.
ps Love your chip choice, I believe the mega8 is probably one of the most versatile low cost chips out there. Cost's around $3.50 apiece, has an onboard 10bit a to d, onboard oscillator, lots of IO for a 28pin chip. You can fit a lot of code in 8K. I have a couple of design's (not cnc related around the mega8)