Sounds like you missed the step of burning the bootloader to set the 8MHz fuses (or you did, but it didn't work). You can still upload the sketch to the 8MHz selection but it will be run 8x slower. So your 2 second flash comes out around 16sec.
I did in fact miss the step with the bootloader. I tried it before but when I followed a tutorial that I found on Internet it didn't work. Can you give a link that describes how to do it?
Do I just have to connect the RESET
from the Attiny85 to the Arduino, select the Attiny85 in the board options and click Tools > Burn Bootloader
Is this right?