Meh, I use my arduino as a programmer, and that was something that I wanted to ask you on this. The way that programmer looks, does it already have an Atmel chip in the socket? If so then you may need to pull your reset high (with a 120 ohm resistor between reset and ground). I have had crazy troubles with my arduino as an ISP until I disabled reset. It's been smooth sailing all the way since then.
but just to ask have you tried using avrdude by itself? It's not that hard.
here is the minimum syntax:
avrdude.exe -p [chip to program] -P [port your programmer is on] -c [name of programmer] -b [baud rate of programmer, usually 19200]
*any of these parts you would do good to add -e which erases the chip before doing whatever you want it to do.*
to lock, or unlock the bootloader add this to the end of the syntax:lock:w:[lock/unlock bits]:m
to set fuses add this to the end of the syntax:lfuse:w:[fusebits]:m -U hfuse:w:[fusebits]:m
to flash a hex file add this to the end of the syntax: flash:w:[your .hex file]
So for example to unlock the bootloader, burn the bootloader, lock the bootloaderset the fuse bits, and then flash an app to an atmega32 using an Arduino As ISP, you would type:
*unlocks chip and uses internal 8mhz oscillator*
avrdude -p m32 -c avrisp -b 19200 -P com4 -e -U lfuse:w:0xd4:m -U hfuse:w:0x99:m
avrdude -p m32 -c avrisp -b 19200 -P com4 -U lock:w:0x3F:m
*flash arduino bootloader*
avrdude -p m32 -c avrisp -b 19200 -P com4 -e -U flash:w:AtmegaBOOT_168_diecimila.hex
*lock the bootloader in*
avrdude -p m32 -c avrisp -b 19200 -P com4 -U lock:w:0x0f:m
*upload a hex file(or arduino sketch if you may call it. still a hex file)*
avrdude -p m32 -c avrisp -b 19200 -P com4 -U flash:w:atmega32blinkpin32.cpp.hex
I have recently found you can upload arduino code through your isp programmer straight to the chip! So you don't have to even have an ftdi if you don't want (and you don't have to use avrdude directly to do it either!)
For your atmega 8, change the boards.txt entry to this:
atmega8.name=Atmega8 programming through ISP
atmega8.upload.using=avrisp*or the name of your programmer!