switching freehub bodies
 

Would switching out a 7 spd free hub with a 8 spd freed hub work? I'm not talking about the entire hub, just the part that the cassette mounts to.

Yes you can do it by switching to a longer axle and spacing it accordingly.

American Classic did manufacture a hub that allowed the use of 7 or 8 speed cassettes.
They had a extra endcap to allow for this with 135mm axles. Also 130 and 135mm spacing is common spacing for MTB 135 being the most common. Now for big details, to convert to 8 speed rear gearing. Two ways to do this also. The first is to buy a new 8 speed freehub (the new 8 speed LX is ideal for this) and replace your existing 7 speed freehub body with it. To do this, you'll need to remove your rear hub axle, and insert a 10mm allen key into the center of the freehub (where the axle was). This 10mm lockbolt on the freehub is what holds it on, it uses standard threading (clockwise tightens/counter-clockwise loosens) and oddly enough, the 10mm bolt itself is the only part of the whole freehub that shimano holds a patent on. That's why Mavic, Hugi and Sachs can offer HG compatible splined freehubs. You will also have to respace the axle for the longer freehub body on the driveside. Move a 5mm spacer from the non-drive side to the drive side of the axle. When you reinstall the axle, you'll need to re-dish your wheel towards the drivetrain by 5mm as well. Once these steps are done your ready to add an 8 speed cassette.

If you don't want to replace the freehub, you can still get 8 speed gearing. A couple companies offer thread on cogs which replace the HG lockring with a 11T or 10T cog in either Titanium or stainless steel. You'll still need to re-space your axle and re-dish the wheel as above but you won't need to change your freehub or existing cassette. This is the best method if you have shimano 7 speed thumbshifters. Its also the fastest method. Cheapest too. TNT and Ultimate Machine are the companies which make the thread-on cogs. Ultimate offers an 11T and TNT both an 11T and a 10T (new this year). If you use a 13-30 cassette then I'd recommend you use an 11T cog. If you have a
11-28 or 12-28 cassette then the 10T is possible. You want to remember to keep the gearing evenly spaced in sizes.

Shoot, I had all that except the re-dished wheel. I thought I would have to get different spokes, so I just canned the whole project. I'm proficient with cone wrenches and axel vices now...:D I'll try again next time I'm in the shop.