Is it possible using a standalone Atmega8 with an Atmel ISPv2 (I'm doing "Upload using programmer") to use the Serial Monitor in the Arduino IDE? From what I have read it seems I may need another board with an FTDI chip to accomplish this.
If you have a serial port in the computer you are using, you can get by using just a MAX232 to interface the Atmega8 with the computer.
If you don't have a MAX232, you can also make a similar circuit doing what the S3v3rino does (S3v3rino is a Brazilian clone of the Arduino, but only with serial port). It's schematics are in the arduino.cc site.
If all you have are USB ports, you do need a FTDI or PL2303 chip to interface the Atmega's serial with computer's USB port.