Hi this is my first post here. 
I was using the Arduino IDE ….am a novice to C C++ and Arduino, but have an EE background. I learned microcontrollers during the last quarter of the previous century first computer was the KIM III, my second the Timex Sinclair.

I have installed Atmel Studio with the demo Visualmicro plug in on a Win7 laptop. Converted some Ardiuno sketches , download them to real Duemilanove and a Clone Uno R3. It all works great up to the simulator debugger.  Very impressed with the environment that I would have killed for in 1980.

My problem is configuring my In Circuit Emulator (ICE) clone; AVRISP MKII to be recognized by ASVM (AtmelStudioVisualMicro). When I open (CTRL +Shift+P)  Tools | Visual Micro |Device Programming. The pull down for TOOL only contains the Simulator; the AVRISP MKII is not in the menu.

My Atmel Studio with Visual Micro plugin did not install the Jungo driver. I do not see any Jungo anything in the Win7 Device Manager. 

When I plug only ( no Arduino connected to ICE or the PC at all ) the ARVISP MKII USB cable into the PC USB port, Win7 detects it and the Prolific USB to serial (Com8 in my setup ) boings open in windows.    I see it in the Win7 device manager and when I remove the ICE from the USB port I hear the boing and the Prolific Com 8 disappears from the Win7 device manager. 

I found a few blogs where people were having trouble with the AVRISP MKII as a bootloader and they seem to want me to remove the Jungo Driver and replace it with various DLL and SYS files called LIBUSB0.

I downloaded the zips for these patches and got them to show up in the Device manager but something is wrong as the AVRISP MKII never shows up as a ( CTRL +Shift+P)  Tools | Visual Micro |Device Programming | TOOL in the pull down. 

I am no expert in patching the registry or doing esoteric installs of DLL and SYS files. I did use the x86 installers from the downloaded zip files and I renamed all the files as some instructions showed (removing the x86 from the LIBUSB0.xxx downloaded files. 

Any help with this would be greatly appreciated. 

One little bit of handholding if you will.

I have before me my newer more powerful PC with a fresh Win7 install on it. 

My ultimate goal is to have a functioning hardware stepping debug system using my clone/driverless/AVRISP MKII for my AtmelStudio / ArduinoIDE / VisualMicro  setup. I want to buy your software as a single person user with VM working of 2 or 3 machines--- but first I want to see this working on this machine. 

Q1) can you extend my evaluation period beginning when I get this rig up in the next few days?

Q2) In what order should I install SW : Arduino IDE, AtmelStudio,  VisualMicro plug-in? driver for the AVRISP

During SW install when do I plug in the Arduino and the AVRISP? When to  make the AVR/Dino connection? 

I hope a detailed step by step for all this already exists and would appreciate if you would help me find it.   

Thanks for the previous detailed response. As you can see rather than try to push that poor old laptop machine I built a dedicated one just for this system. 

PS:  What a value. I bought 8051 IntelICE at $7K a seat in the mid 80s. And the Arduino is so easy for someone who forgot everything about programming. 
Thanks.