Arduino simulation in Proteus

First thing first, the Ingredients:
(i)  Proteus - ISIS
(ii) Arduino Software - v0017 (this is important, if you are want to run simulation in Proteus then do not download the latest version of Arduino Software)

So, let's begin step by step:
(i)   Run ISIS and make a circuit like this:

      Here are some specifications:
           capacitor = 22pF
           Vcc
           Crystal Oscillator = 16MHz
           Microcontroller = ATMega 328p

(ii)   Double click on micro-processor and change the properties as follows:

(iii)   Now run Arduino 0017 and go to
             File -->  Examples --> Digital --> Blink
        This is just for demonstration, you may write your own code
     

        'Save As' this file and remember the path of directory, you will need it later.

(iv)   Push the 'UPLOAD' button, you will see a couple of errors, ignore them...
        Go to the directory and search for the folder 'applet'
        Here you will find a hex file...that is what you need

(v)   Go back to your micro-controller and burn this file on it, process is simple
              - Double click on Atmel
              - In Properties, you will see a field 'Program File', insert the HEX file here by pressing the folder button right next to it

(vi)   Press Enter and run the simulation....and there you go...a blinking light at PIN 19