It is likely because the IE control that MC is using was designed for an earlier version of IE (perhaps even IE6), which causes IE8 to revert to compatibility mode.
I don't believe it's possible to have IE7 and IE8 installed at the same time.
Not quite true, in one sense. While you are only able to have either the IE7 or IE8 user application installed at one time, and not both, IE8 includes both the new IE8 engine and the older IE7 engine. This is to provide compatibility with websites that detect IE and then use HTML code using IE-specific hacks, rather than strict compliant code. Otherwise, any site that did so would not render properly at all.
Currently, Microsoft maintains a list of sites that "aren't compatible" with IE8 which are then automatically rendered in this IE7-engine "Compatibility Mode". The list is 33,000 entries long, and includes such gems as
http://www.microsoft.com/ (comedy gold).
Apart from the Microsoft-owned sites, though, it isn't really Microsoft's fault (this time anyway). The IE8 engine is much more compliant with HTML standards than any old version of their browser has ever been. It is just that many websites look for the IE browser and then automatically "break" themselves. So, it was Microsoft's fault for ever releasing such a non-compliant browser in the first place (in their attempt to dominate and control the Web). Now that they've lost that battle, and they're trying to become good citizens, they're reaping what they've sown.
