I've received a couple questions from people who all have issues using datasheet view when using IE 8 in SharePoint 2007. I've reproduced this in MOSS and WSS 3.0 with the same result. I use Office 2003 as well.
Problem 1: Unable to open the task pane
Clicking the task pane on the right side simply does nothing. Can't open it.
Problem 2: Can't fill down
Before, you could click in a cell, click the little square, and then drag down. This filled all the cells below just like in Excel. Now, it doesn't do anything.
Problem 3: Clicking document name doesn't open the document
Before, you could click the document name to open the document. Now, if you click in the Name column it just goes to "edit" mode to rename the file.
Workaround: Clicking on the icon in the Type column to open the document.
I'm trying to get an idea if this is expected behavior or if this is broken. If it is broken, any ideas on how to fix it?