It looks like I can get a pretty good deal on a D8 on ebay. The Audio Technica AT822 microphone is in my price range, wouild this be appropriate for indoor clubs 100-200 capacity? I am looking at spending 150-200 for a mic.
That certainly would be appropriate, a nice small compact rig. It would make decent tapes without a doubt. The only thing I would tell you to maybe add is some switchable line transformers from HOSA to give you some gain, I believe they are only about $40 a pair.
Be careful with D8's on ebay, because you don't know necessarily how many hours are on the heads, if the heads need realigning, if it has a history of eating tapes, when it was last serviced ect. If you get a dud, servicing fees are more or less going to be around $150 or more. A JB3 is 20 gigs, around $140 refurb from creative and allows you to transfer via USB or Firewire in minutes.
If DAT is really the way you would like to go, and I certainly see the attraction to it, a hard copy, smaller size, ect. I would purchase one from the boards here where you can be 99% of the time assured of the quality and the problems if any are told upfront.
hope this helps!