If anyone is interested, I just created an open source hand held OBDII scanner with USB interface. See www.sterntech.com for more details.
Here are some features it has:
2 line LCD display for stand alone operation
USB interface for firmware updates and connection to Laptop.
Optional SD card for data logging
Open source software and schematics
LEDs for readiness indicators
Built in bootloader through USB which is compatiable with AVR Studio
Hardware support for all OBDII protocols, software is in progress.