Thanks for the reply. From what I can see, the ATMega8 ships configured for an internal clock, I assume no external hardware is required to drive this, but just incase I have managed to upset the fuses in previous attempts I have tried generating a 250Khz Square wave from Timer1 on the master and using this to clock XTAL1 on the target. Still not getting anywhere though.
I will put this on hold for now and try again when I have access to a second UNO board with a clock installed to host the target.
Thanks again for the reply and if you have any suggestions that I can try with my current set up - UNO with optiLoader - to program a target ATMega8 I would be more than happy to try them.