To be honest I would have expected Paradox 8 to be able to read tables from all Paradox versions. But just in case, try the following using the Tools -> Table Repair option within Paradox 8 and set the File format to a later version (7 was the last change to the table format)
You will need to run this for each table you have.
In restructuring the table you are probably trying to use a data type or index feature that was unavailable in the 3.5 product. Paradox is telling you that it cannot keep that table as a version 3.5 table and so you have to change it to a newer table format. Might as well use the most recent version when you do this. The only other issue is if you are trying to use older forms with the reformatted table. They may work, else they themselves might need to be recompiled. But I would bet they will work just fine.