"We think he is too old and should be embarrassed."
This is the line of your post that is worrisome. Please, if you take anything away from all of the response, do not make your step-son feel embarrassed, ashamed, etc. Being close with his mother is a good thing, and if you shame him for this, it may cause a problem that was never there before.
My fiance thinks it is weird that my son, 4 years old, is constantly wanting my attention and affection. I think men are different about those kinds of things, and I am sure my fiance would agree with your hubbie. But, unless there is something inappropriate going on, I truly believe you have nothing to worry about.
My mother was a single mom. I slept with her until 10 yrs old, most times sleeping in her bed and occasionally in my own. Again, unless the step-son is acting strangely, siblings notice something strange, etc., then I am sure it is fine. I do think it is healthy for the boy to sleep in his own bed to encourage confidence and independence, but since he seems to have no problem sleeping in his own bed at your house, he seems to be doing just fine.
I really wouldn't worry about it too much until he gets closer to puberty. 8 yrs of age is still pretty young. Just make sure the boy is healthy physically and psychologically. Keep up your good parenting and best wishes to your family.