Loading a bootloader on the ATmega8 is tha same as loading a bootloader on the Atmega328P except you select the board "Arduino NG or older w/ ATmega8" instead of "Arduino Uno" or "Arduino Duemilanove w/ ATmega328".
Right i have selected "Arduino NG or older w/ ATmega8" after loading bootloader in atmega8,
m got Bootloader burning successful message = ok
Program loading/uploading successful message = ok
Led showing correct status while loading program.(Blinking Tx, Rx Leds are correctly )
but why my led program is not working after loading program??????? i am testing blink led program on my board, is there any special setting or any setup while we are using Atmega8 on arduino328 board...
I can't think of any reason for the LED not to work. The digital pin 13 is Port B bit 5, just like on the ATmega328 and that is connected to chip pin 19 just like on the ATmega328. If you put a meter on pin 19 of the chip does it go on and off?
It certainly looks like burning the bootloader and uploading the sketch worked fine, making this a "why isn't BLINK working?" question. As John points out, your board is far from being a "standard" Arduino; are you sure that the on-board LED is connected to the same pin? (it does blink after the reset, which is normal (though it blinks a bit weird (probably a video artifact))
Could you post the full compile/upload log (with "verbose" on) created when you upload the sketch?
Since you were apparently successful uploading the bootloader, you could try uploading optiboot instead.
I would not really expect this to change anything, but I suspect that the ATmega8 bootloader hasn't been looked at in a long time... (For example, the pin13 LED blinks immediate AFTER your upload. Optiboot wouldn't do that; it would just start the sketch. It COULD be the way that the ATmega8 bootloader starts sketches (restart the bootloader and let it time out), or it could be the sign of something more mysterious happening.)