The truth is that you can run Windows 7 and Windows 8, in both 32 and 64-bit versions, without any problem (you have a 64-bit processor). The problem is that Apple only supports a 32-bit Windows 7 version for your Mac. Why? Because Apple wanted to drop the Windows 8 support for the computer you are using.
You can see in this page all the Macs compatible with 64-bit Windows editions > http://support.apple.com/kb/HT1846 As you can see, your Mac isn't supported, so you can only install a 32-bit Windows 7 version with Boot Camp if you want to run Windows correctly.
I told you at the beggining that you can install any 32 or 64-bit Windows 7 and Windows 8 versions on your Mac because your iMac meets the requirements for both editions. However, you need the Boot Camp drivers to make Windows run properly, and here's where Apple has dropped a lot of computers, making them unusable if you install a version that Apple clasifies as unsupported. Sad but that's true
Thank you so much for responding to my question and sheding some light on the issue.
Apple has made this very confusing. If Apple have essentially dropped support altogther for Windows 7/8 in 10.8.3 Boot Camp 5 for 2008 iMacs, then why bother to have a Boot Camp Assistant app? Why would there be an option in the Boot Camp Assistant 5 for installing Windows 7? I suppose the only definitive way is to actually install Windows 7/8 32/64 bit and see what happens, however I can't do that because I don't have an install disc.
One thing is Boot Camp Assistant 5 (included with OS X Mountain Lion) and another thing are Boot Camp 5 drivers. You can use Boot Camp Assistant 5 to download Boot Camp 4 drivers without any problems. Furthermore, if you try to download the Boot Camp drivers from Boot Camp Assistant, it will tell you that your Mac only supports Windows 7 and it will download the Boot Camp 4 drivers, that you can get from the Apple Support page, too > http://support.apple.com/downloads
Apart from that, Boot Camp Assistant is neccessary to create the Windows partition and/or create a Windows 7 or Windows 8 installation USB drive, for some computers
I'm running now a triple boot setup (Mavericks, Windows 8.1 x64 and Ubuntu 13.10 x64) on my 2008 iMac)
Contrary to Linux - Mavericks and Windows 8.1 both were a bit sluggish with just 2G ram so I upgraded to 4G.
Regarding driver support: sound, brightnesscontrol, bluetooth, wlan, isight camera - everything is working on Linux and Windows 8.1.
And yes - Bootcampt 5 drivers can be installed on Windows 8.1 x64 on the 2008 iMacs - just use the msi install instead of launching the exe..
I have IMAC early 2008. I managed to upgrade to windows 8.1 from windows 7 via bootcamp. I used 32 bit. After that I installed boot-camp 4 sucessfully. I did get a message coming up say bootcamp only supports windows 7 but I carried on installing and its fine. Once thing you will notice if you use skpye etc is that microphone dont work. This is due to the face that the realtek on bootcamp 4 is out of date. The simple fix for this is that you hve to uninstall the realtek software via the control panel and goto the realtek website and download and install the latest software and you will find that the microphone works and the sound from the speakers is louder in par with OSX.
If you need to adjust brighness you can do this via the boot camp control panel. I have been using windows 8.1 for a year and so far no issues.