I am using 2 x 4051 multiplexers (one as mux, second - demux)
That is not very normal, have you got a schematic of how you have wired it up?
Normally an 8X8 matrix is wires up using latches and buffers.
Using a 4051 for lighting up LEDs not not a good idea. The current is limited. It is designed for more of inputs.
See this for typical configurations:-
http://www.thebox.myzen.co.uk/Workshop/LED_Matrix.html