7 to 8 is quite possible in road. I simply don't know about mtb. I doubt the dish is a big deal, and it can be redished.

My modifications are road bikes, and I've done it 2 ways:
1-Change a 7-sp freehub to an 8-sp freehub, redish and use a longer axle. I paid LBS $50 total for the change, including parts.
2-Swap out the rear wheel for a more modern one. This is by far the easiest. I generally pay $60-$125 for a wheelset, and sell the older set for $40-$75, sometimes up to $100.

My guess is that if you had a 130mm spaced rear, an 8-sp would fit right in there. I'm not sure when mtb's went to 135, but I don't think it was during the 8-sp era.

I'll yield to the older mtb guys here. You can PM roccobike, he knows that @#$%^& inside and out.