What does it say the signature IS?
You didn't wind up with mega88s or mega8As, did you?
If you get a 328 signature, it probably means that the IDE is talking to your duemilanove rather than THROUGH the megaISP sketch to your target board. It helps if you use a board without the auto reset circuitry to run the megaISP sketch.
I haven't burned a 8MHz mega8, but I did successfully use the megaISP sketch to put optiboot on some mega8s.
(The fact that you're getting an "invalid signature" message is actually a good sign. If your programmer weren't wired right, you probably wouldn't get any response at all!)