Atmega 8 Programming Error

What means bi-directional for parallel port.

Parallel ports on modern systems usually have several different configurations that can be set via the BIOS setup functions. What is yours set as?
Or, just try some other setting.

Parallel ports are difficult to access from modern operating systems like W7. "giveio" is supposed to fix that, but I've heard mixed reviews of how well it works. (for example, I have a parallel-port device programmer with some sort of giveio equivalent running under WXP. It only works when its parent (DOS) program is run in "full screen mode." It's documented as only working that way. But I can't figure out why that would be true!
Do you have any computers with an older OS? Could you boot a linux "live cd" just for burning the initial bootloaders? How about something like freedos?