Jay, trying to remember...

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Getting my AVR Dragon to talk to the Arduino IDE on OSX

I added the following to /Applications/Arduino.app/Contents/Java/hardware/arduino/avr/programmers.txt and restarted the Arduino IDE and magically, this seemed to work for me.

  dragon.name=Atmel AVR Dragon in HVSP mode
  dragon.program.extra_params=-P usb

I pieced this together from these two sites.