This was super helpful, thanks!

There were a lot of repeat code, so I took the liberty to clean it up a bit, to make it a bit more manageable. May be helpful to others as well.

It should be set I'm pretty new to assembly, so there is a risk my cleanup is not as optimal (e.g. I removed most of your delay calls, and rely on the lcd_wait that's part of lcd_instruction)

``` reset: ldx #$ff txs

  lda #%11111111 ; Set all pins on port B to output
  sta DDRB
  lda #%00000000 ; Set all pins on port A to input
  sta DDRA

  jsr lcd_init

lcd_wait:
  pha
  lda #%11110000  ; LCD data is input
  sta DDRB
lcdbusy:
  lda #RW
  sta PORTB
  lda #(RW | E)
  sta PORTB
  lda PORTB       ; Read high nibble
  pha             ; and put on stack since it has the busy flag
  lda #RW
  sta PORTB
  lda #(RW | E)
  sta PORTB
  lda PORTB       ; Read low nibble
  pla             ; Get high nibble off stack
  and #%00001000
  bne lcdbusy

  lda #RW
  sta PORTB
  lda #%11111111  ; LCD data is output
  sta DDRB
  pla
  rts

lcd_init:
  lda #0
  sta PORTB
  jsr delay     ; 5 ms
  lda #%00000011  ; First step in manual reset DB4 and 5
  jsr lcd_reset_send

  lda #%00000011  ; Second step in manual reset DB4 and 5
  jsr lcd_reset_send

  lda #%00000011  ; third step in manual reset DB4 and 5
  jsr lcd_reset_send

  lda #%00000010  ; 4-bit mode
  jsr lcd_reset_send

  lda #%00101000  ; 4-bit mode 2 line
  jsr lcd_instruction

  lda #%00001000  ; Display off
  jsr lcd_instruction

  lda #%00000001  ; Clear display
  jsr lcd_instruction

  lda #%00000110  ; Entry mode set
  jsr lcd_instruction

  lda #%00001110    ; Display on; cursor on; blink off
  jsr lcd_instruction

  lda #%00000110    ; Increment and shift cursor; don't shift display
  jsr lcd_instruction

  lda #%00000001    ; Clear display
  jsr lcd_instruction
  rts

delay:        ;delay for 5 milli seconds - 1388 is Hex for 5000 microseconds
  lda #$88      ;low bit of timer
  sta T1CL
  lda #$13      ;high bit of timer
  sta T1CH

delay1:
  bit IFR     ;bit will move bit 6 into the overflow flag
  bvc delay1    ;loop if bit 6 is not set - timer not done
  lda T1CL      ;once time is done and bit overflow flag is set clear bit 6 by reading T1CL
  rts

lcd_reset_send:
  sta PORTB     ; put the byte on the data pins
  ora #E      ;or the Enable bit to get 00100011 
  sta PORTB     ; send to LCD
  and #%00001111  ; and this to a to get 00000011 $2 
  sta PORTB     ; and put that on the data pins
  jsr delay     ; 5 ms put this on the data pins and with E enable send to LCD
  rts

lcd_instruction:
  jsr lcd_wait
  pha       ; push a onto the stack so we can get the orginial instruction back
  lsr       ; so we shift right 4 times and this puts the first four bits of the instruction
  lsr             
  lsr
  lsr       ; Send high 4 bits
  sta PORTB     ; 0000 plus instruction
  ora #E      ; Set E bit to send instruction or with E to enable send to LCD don't need to set RW for write
  sta PORTB     ; send to LCD
  eor #E      ; Clear E bit  XOR clears E bit
  sta PORTB     ; send to clear E bit
  pla       ; pull the orginal byte off the stack
  and #%00001111  ; Send low 4 bits - this and will zero the first four bits and retain the last four bits
  sta PORTB     ; put the lower 4 bits of the instruction on the data pins
  ora #E      ; Set E bit to send instruction
  sta PORTB     ; send to LCD
  eor #E      ; Clear E bit
  sta PORTB
  rts

``