I'm designing a small site with Dreamweaver 8. How do I set up Dreamweaver so the site will opperate well in IE or lower?

Huh ?? There are no such settings. The only time this is a big issue is if you're using CSS. If you are, then you're going to have to learn CSS, learn what IE's bugs are and how to code around them. Then you use conditional comments to make IE read the "special" css rules you have to use to make IE do things properly.

DW will spit out crap code on it's own, so you're really better off learning to code HTML and CSS by hand.