It's my opinion that a child's believing in such things as Santa, Easter Bunny, etc is essential to their future faith in God. It's a 'warm-up' of sorts to allow their imaginations to believe in Good Things they can't actually see.
When they were 4 and starting asking the questions you mention, the answer was easy, 'MAGIC!"
But since she's 8 and has already heard from kids at school that there is no Santa and so on, she is wanting you at this point to be straight with her. She will NOT see it as you've been lying to her all these years (unless you present it that way of course). She will take it as another milestone in her life and she's older, smarter, and mature enough to handle certain truths.
You can still talk about Santa same as you always did, you'll have a different bond with her now about it since she's 'in the know'.
I still refer to Santa and my kids are 18, 16, and 13.
It's just nice!
:)