Adding more decoupling capacitance is good.
However, if you repeatedly get the "RST" error, consider replacing the AVR chip.
I have had many people contact me about this issue, and EVERY SINGLE TIME it was a bad chip (usually a cheap China clone from a non-reputable source). "RST" indicates that a watchdog-reset has occured, which should never ever happen.
Regarding the temperature offset, the code allows for an offset correction. That assumes the analog voltage coming from the thermo-couple, once converted to a 10-bit ADC number, is basically in °C already. This may or may not be the case with this device.
Ideally you'll have to use an external temperature probe and graph a calibration curve for °C (at nozzle) vs. ADC value and compensate accordingly. For this to work, you'll have to fix the "cannot reach high temperatures" first, I think.
Quite a bit of work...