Good answer. I have just done what you suggested.
I selected in Arduino 1.0.1->Tools->Board the Atmega8 option and recompiled the Blink Led example.
The new hex file works now on the virtual Atmega8 from ISIS Proteus. One pin is blinking.
New question:
How can I map better the pin declared in Arduino 1.0.1 with that on the stand alone Atmega8 micro-controller.
For instance, I declare in the Blink Led example source code:
...
int led = 13;
...
When I run the hex file on Atmega8, pin 17 is blinking.
For more complicated programs the fact that pins do not correspond introduces huge complications. How can I fix this.