http://lowendmac.com/2007/hacking-mac-os-7-6-1-to-work-with-many-os-8-apps/
MacOS 8 (the early versions, at least) are still largely based on System 7, that's why so much software is backward compatible with System 7. The only reason for the name change was so Steve Jobs could get out of the clone contracts which stated that Apple would only allow the clones for as long as System 7 was still being marketed and then the contracts would have to be renegotiated for MacOS 8. The only exception was Power Computing who managed to get a much sweeter deal from Apple than the rest of the clone makers so Apple had to buy out their contract rather than just cancel it outright with the system change.
MacOS 8 (the early versions, at least) are still largely based on System 7, that's why so much software is backward compatible with System 7. The only reason for the name change was so Steve Jobs could get out of the clone contracts which stated that Apple would only allow the clones for as long as System 7 was still being marketed and then the contracts would have to be renegotiated for MacOS 8. The only exception was Power Computing who managed to get a much sweeter deal from Apple than the rest of the clone makers so Apple had to buy out their contract rather than just cancel it outright with the system change.