Just to make sure, if you use an Oracle client utility like SQL*Plus can you connect to the Oracle 8i database?

Hard to say but you might be right about the linked server provider trying to use the provider from the 11g client.

This is not exactly related, but it there seems to be instances where outside products are not aware of multiple Oracle homes.

Oracle 10 and Oracle 11 clients coexistence

I wonder if you take a look at your path environment variable and see which client Oracle home comes first if that indicates it could be using the 11g client provider. If that is the case you could try putting the 10g client path first and see if that fixes it. Not sure if SQL would have to be restarted first.