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PROBLEM:

PPM converter only worked if I first connected the Rx and only after a few second I connect the PPM converter.

SOLUTION:

Update firmware.

PROCEDURE:

1- Buy one AVR programer (arround 4USD) pay attention that you need one 6 pin connector cable.

2- Connect AVR programmer to PC and follow this tutorial: 

http://elecrom.wordpress.com/2009/04/19/usbasp-tutorial-usbasp-driver-installation/

to install the windows/linux drivers (latest version of drivers found here http://www.fischl.de/usbasp/)

3- Download and install a programmer software: http://khazama.com/project/programmer/

4- Connect the AVR Programmer to PPM encoder board

5- Download the latest version of the firmware. I use this one because it worked fine http://www.rcgroups.com/forums/showpost.php?p=14347844&postcount=2445

6- Decompress the downloaded file to a folder.

7- Use the program installed in step 3 and select AVR: ATMEGA328P option.

8- Use the program installed in step 3 and select file Load EEPPROM and select the HEX file that suites you from step 6. In my case it was ppm_encoder_v4_3+bootloader_16Mhz.hex

9- Use the program installed in step 3 and select file Load EEPPROM and select the HEX file that suites you from step 6. In my case it was ppm_encoder_v4_3+bootloader_16Mhz.hex (don't know if this step is necessary)

10- Click the button Autoprogram.

This is my personal experience. If needed adapt it to your case.