This is what you can do to debug your circuit.
First, forget about the temperature sensor. Just write a program to output a constant ASCII character repeatedly to the AVR serial connection. Confirm you can read the character back from whatever you are using to monitor the serial signal on your computer. This will prove a lot of things.
Next, use a variable resistor to give a constant voltage to the A/D converter input and do the conversion. Output the result to the serial connection.
However, you should be aware that certain values in the serial information is used for "control" functions for terminal software and that means you are unlikely to be able to use all 256 values of your 8-bit data to report back the A/D result. You'll need to convert the A/D result into ASCII and send them out instead.