Probably the most common mistake once you've got the double green lights on the AVR ISP is inadvertently mixing up the MISO and MOSI pins. Triple check those. You could also check the voltage on the ISP connector between VCC and GND, but I'm guessing that's okay because of the double green lights. The double green lights imply that your reset connection is good too (not always).
I've personally been battling some really gnarly flux residue and have had some of the same issues because of that. The flux, in sufficient goopy quantities, can form a bridge between connections. Take something pointy, like a thumbtack, eyeglasses screwdriver, or dental pick and clear out any goop that may be betwen your solder joints and traces. Get a magnifying glass to see better. If the flux is still liquefied and is not effectively being removed by this method, use the scrub method below for better results.
Instead of scraping, you can grab a toothbrush and some alcohol and scrub the solder side of your board. Scrub gently and thoroughly. You should probably unsocket your atMega8 before scrubbing and then let the board dry for a while before using it again. Most household alchohol has water in it, so it won't evaporate as quickly as 100% alcohol. The alcohol will dull the shine on your solder connections, but that's okay. If you like them shiny, just temporarily reheat them with your soldering iron and they'll shine again. And, just as a disclaimer for the folks with a death wish, don't use that toothbrush to brush your teeth. In fact, mark it as containing lead with a little skull and crossbones. K, thanks.
And finally, inspect your board for "bloated" solder connections. The connections should look like a mountain peak, not like a ball. If they look like balls, you've got too much solder on the connection. Balls tend to find ways to connect to neighboring solder connections that are hard to see with the naked eye.
Don't feel bad. My first $50 robot board didn't work at all. Heck, even now, half the things I put together don't work at all. The scrape and scrub method has saved a few boards and now I'm at about 90%. I'm sure you'll have better luck. My soldering skills really stink. That's why I know so much about fixing it.