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Use this settings
Low fuse 0xff
High fuse 0xd9
MicroCon
I can see ATMega32 in Proteus7.7. You can try it or go for the latest one.
There is a code snippet of second uart using timer2 module for atmega16 in the net. Search for it.
Another option is to use a analog switch like cd4016 to switch between the two uarts
Hope this might give an idea.
MicroCon