For this hack, we only need a few of the pins on the FT232RL. We need TXD, RXD, AGND, GND, VCC, VCCIO, 3V3OUT, and TEST. You can start out by shorting the TEST and AGND pins, and the VCC and RESET# pins. After this, run a small piece of wire from 3V3OUT to VCCIO, and a small piece of wire from the GND next to VCC to AGND/TEST. The VCCIO pin takes in the voltage supply for the RXD and TXD pins, and since the Pi is 3v3, we need to tie it to the 3V3OUT pin voltage source. A problem that took some reading to figure out is that TEST needs to be pulled to ground in order for the device to enumerate correctly, or else the device will connect, but quickly disconnect with error messages about improper IDs.
In order to see boot messages over serial, your cmdline.txt should look similar to this:
And in your /etc/inittab file, change the line that should read similar to:
1:2345:respawn:/sbin/getty 38400 tty1
and change it to:
1:2345:respawn:/sbin/getty 115200 ttyAMA0
After that, you should be able to do single cable development on your Pi. Good Luck!
Raspberry Pi Schematics