The 8-inch rear end came out in 1962 [1962-1980]. The 8-inch 3rd members from '62-'66 are the weakest versions. Starting in '67-up, the 8-inch 3rd member case was revised [C7OW casting] to include more vertical and cross-webbing on the face of the case to strengthen it.
There are claims of people running these 8-inch rears with 400 hp, and they may be getting away with it, but these rear ends were not engineered to reliably
handle that much power and torque --at least not without a lot of beefing up with [expensive] aftermarket parts.
All early V-8 Mustangs came with 8-inch rears except for the HiPo 289s --they came with 9-inch rears. The HiPo 289s were rated at 271 hp [Shelby 289s were rated at 306 hp].
The HiPo 289 carried over into the '67 model Mustangs. Even though the 8-inch 3rd member case had been revised by '67, Ford still did not use the revised 8-inch in the HiPo 289 Mustangs --they used the 9-inch.
Manual transmissions and sticky tires with lots of traction are not the only things that will kill an 8-inch. Most Mustangs suffer from wheel-hop, and this can also kill an 8-inch, even with regular street tires.
There are a few common failure points for an 8-inch; one is in the area of the input driving pinion support on the front of the 3rd member casting. The other is in the area of the pinion [spider] gears inside the differential, or with the differential main caps/bolts.
An example of a driving pinion support failure on an 8-inch [revised case] 3rd member:
An example of the main caps and main cap bolts breaking that lead to this disaster on this 8-inch [revised case] 3rd member:
I suspect the reason why so many people run 8-inch rears, in applications it wasn't really designed to reliably handle, is because a [wrecking yard] 8-inch is much easier to find in the right width for an early Mustang than a 9-inch of like parameters. It's your car and your money, so only you can make the decision of running a rear end that might last
, or to run one that will give you no worries.
An 8-inch, beefed up with expensive aftermarket parts, is only as strong as your base-model, stock-configured, run-of-the-mill wrecking yard 9-inch rear.
8-inch rear ends only came with differentials that had 2 pinion gears inside. A 9-inch could have either a 2-pinion differential, or a much stronger
4-pinion differential to distribute the force over a greater surface area.
Some 9-inch rear end info from my site: The Ford 9-inch Rear End Differential Types Third Member Cases Third Member I.D. Codes