I'm not sure about Atmel, but according to Intel, their 80C52 only requires a 1 mfd cap between reset and +5, (pulldown resistor is internal) although the preferred method of choice in this forum is to use a supervisor chip. I would check with a meter to make sure RST goes to 0 volts, or very close to it.
If its not too lenghthy, post your code here and let the forum gurus look it over. Also, since you are running from internal flash, verify that your code is actually there by reading it back.

Good luck,

Hal