arduino with internal oscillator on 1Mhz

The frequency the ATmega chip is running at, is hardcoded into the bootloader (ATmegaBOOT.c). While it is a configuration parameter in the Makefile, putting a bootloader on an Arduino-like board that does not run at 16.0MHz requires adjusting the Makefile and rebuilding the bootloader.
The best place to get Makefile and bootloader source for the ATMega8 is Arduino Starter Kit kaufen [verschiedene Ausführungen]

The ATmega8's Makefile defines DEFS= -DF_CPU=16000000 -DBAUD_RATE=19200 which needs to be modified to DEFS= -DF_CPU=1000000 -DBAUD_RATE=19200

The last thing that needs to be done is adjusting the Arduino IDE preferences file: ~/Library/Arduino/preferences.txt on the Mac and C:\Documents and Settings<USERNAME>\Application Data\Arduino\preferences.txt on Windows:
The build.f_cpu preference needs to be set to 1000000L

Check my complete post regarding using the ATmega8 and ATmega168 internal clock here:
http://wolfpaulus.com/journal/embedded/arduino3.html

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Wolf Paulus