Low 0xe1, High 0xd9, are the default fuse values for the mega8, so there's nothing wrong with them.
If you're certain that you actually were trying to program a mega8, then the problem is in the connection to the chip. I.e.,
wiring from chip to usbtiny
usbtiny to computer
If you have some other known-working board, you can try to narrow down this list of candidates. I'd start with a simple reboot of the computer.
Did you install the 'optional' resistors in the usbtiny (R4,R7)? The assembly tutorial recommends them for use with the SpokePOV, but they can help with noise issues in general.