Did some changes and now can handle dynamic resolution change through command line for YUV mode (128 x 120, 160 x 120, 256 x 240, 320 x 240), can display B&W, 4 bits per pixel 128 x 120 @ 5 fps, all the modes can be change dynamically through serial port.
Above, am image captured in YUV mode @ 0.7 fps (256 x 240) with Mario presenting the CTS v0.4 board fully assembled (same with the one used to capture this frame) and Alex in the background. This image has only AWB enabled on OV7670 side, no sharpening/contrast/brightness/saturation applied (may look a bit soft).
So far, tested with Atmega16 and Atmega1284P and works fine. Around 5 Kbytes flash and less than 1Kbyte RAM should be used so far, however, may have to limit image resolution on Atmega16 to QQVGA as there will ne not enough memory to do tracking at QVAG resolution.