Hm, if your contrast is bad, maybe you should suspect hardware rather than software.

To check is your LCD is OK, you could try to:

1) Connect just Vdd/Vcc (HD44780 pin 2 +5V), Vss/GND(1) and Vee/Vo(3) according to schematics (if you connect it with pot, set it to max) and disconnect everything else. You should see 'test- pattern', character blocks in first row. If you don't see then there is either problem with insufficient power supply to LCD so it can't be driven - check whether you bring +5V to Vdd/Vcc pin! or your LCD if faulty.

2) To verify if your LCD is OK, try connecting it to PC parallel port and run program such as LCDcentar. It shouldn't take long, and could narrow down potential hardware questions.

For example, when I've interfaced 'my first LCD' I've tested it on PC port, then connected it to mC, it gave test-pattern and I've put it aside. Then I've tinkered a bit with software and hardware (LEDs on ports, pull-ups...). After a while I've reconnected LCD and it 'wasn't working'. Looked like 'no contrast' situation similar to yours. What went wrong? I've added 7805 in between and forgot to raise input voltage, so LCD couldn't be driven, but mC COULD! mC was working fine (along with all LEDs) just LCD was 'faulty'. After I've raised input voltage so that LCD gets +5 V it miraculously 'started to work' :)

Best luck,
CN