divyansh:
I am using a custom made board having an atmega8 programmed with USBasp application to program a target device and till now I have never faced any real problem with the board.I am trying to make an ethernet based data logger ,but since I am not able to run even a SD card on the board i have posted this topic.
When I was using the Data Logging Shield there was a warning on the SD library that the library required a lot of RAM and you would be lucky to get it working on anything smaller than an ATmega328 (2k of SRAM). Since the ATmega8 has only 1k of SRAM I think that might be your problem.