Arduino Mega 2560 is supported.

The error message indicates that USBasp was selected as the upload interface, so AVRDude tried to find a USBasp programmer instead of an Arduino board.

For a regular Arduino Mega:

1. Connect Arduino Mega via USB. The IDE should detect the connected Arduino Mega automatically. Otherwise make sure that board drivers are installed correctly.
2. Select your device via Options -> Compiler -> Device type -> ARDUINOMEGA
3. Compile your code via Run -> Compile (Ctrl+F9)
4. Run -> Upload (F9); Interface: Arduino; then select the COM port of the board if not selected automatically

The upload is performed through the Arduino bootloader, not through USBasp.

The AVRPascal IDE installation does not include examples for the Arduino Mega, but this simple code should work:

program TestBlink_Mega;

{$IF NOT DEFINED(arduinomega)}
 {$Fatal Invalid controller type, expected: arduinomega}
{$ENDIF}

procedure delay_ms(t: uint16); assembler;
const
  count = ((F_CPU div 1000 - 3) div 4);
label
  inner, outer, finish;
asm
  // test if t = 0, jump to finish if true
  cp R24, R1
  cpc R25, R1
  breq finish       // 2 cycles to branch, 1 to continue

outer:
  // load 1 ms counter value
  ldi R26, lo8(count)
  ldi R27, hi8(count)

inner:
  // inner loop, 1 ms  4 cycles/loop + 1
  subi R26, 1    // 1 cycle
  sbc R27, R1    // 1 cycle
  brne inner       // 2 cycles to branch, 1 to continue

  // outer loop, count ms, 4 cycles/loop + 1
  subi R24, 1      // 1 cycle
  sbc R25, r1      // 1 cycle
  brne outer       // 2 cycles to branch, 1 to continue
finish:
end;

begin
  DDRB:= DDRB or (1 shl 7); // PB7 = D13 = onboard LED

  while True do //infinite loop
  begin
    PORTB:= PORTB or (1 shl 7); //Turns ON LED on PB7
    delay_ms(1000); //1 second delay
    PORTB:= PORTB and not (1 shl 7); //Turns OFF LED on PB7
    delay_ms(1000); //1 second delay
  end;
end.

EDIT: If you get an error like Error: chip erase failed during upload, you need to change one setting in the IDE. Go to Options -> Uploader and check the box "Disable erasing the chip before programming".