All credit goes to the very informative blog post below. The information provided is just distilled for our OpenSprinkler IDE requirements.
http://www.open-electronics.org/arduino-full-memory-upgrade-to-the-last-atmel-toolchain-version/1. Download and install the 0023 build of the Arduino IDE. This dedicated IDE can coexist alongside your 1.0.1 installation (in a different directory) if needed. As Ray has mentioned many times, the older Arduino core produces smaller compiled binaries.
http://arduino.googlecode.com/files/arduino-0023.zip2. Download and install the updated Atmel “Toolchain”. If you try to find it yourself, its important not to use the newest version. It contains a version of avr-gcc that will not work with the Arduino IDE. You’ll want version 3.3.1 of the toolchain. When running through the installer, it asks if you would like both the 8bit and 32bit. Uncheck the 32bit option as we will not need it.
http://www.atmel.com/Images/avr-toolchain-installer-3.3.1.1020-win32.win32.x86.exe3. In your Arduino 0023 directory (I named mine C:\arduino-0023-AtmelTC), navigate to <arduino_dir>\hardware\tools\
4. Rename the ‘avr’ directory to avr.old
5. Copy the ‘AVR Toolchain’ directory from <program_files>\atmel\AVR tools\ to <arduino_dir>\hardware\tools\
6. Rename ‘AVR Toolchain’ to avr
7. Copy <arduino_dir>\hardware\tools\avr.old\bin\avrdude.exe to <arduino_dir>\hardware\tools\avr\bin\ (overwrite the existing binary)
8. Copy the ‘etc’ directory from <arduino_dir>\hardware\tools\avr.old\ to <arduino_dir>\hardware\tools\avr\
9. Delete the ‘include’ directory from <arduino_dir>\hardware\tools\avr\avr\
10. Download the modified include directory. Decompress it and copy it to <arduino_dir>\hardware\tools\avr\avr\
http://www.open-electronics.org/wp-content/uploads/2012/04/include.rar11. Download OpenSprinkler 1.8 from Ray GitHub and copy the library to <arduino_dir>\libraries\
https://github.com/rayshobby/opensprinkler12. Open the modified Arduino IDE, make your edits (if needed), compile.