To set up a PC to run multiple copies of LabVIEW, install oldest first, then newer ones. Let LabVIEW install in the system-specific default window (which keeps the libraries, examples, etc. apart).
You need to be careful when opening VIs with multiple LabVIEW versions. You cannot open a "newer" VI in an "older" version of LabVIEW, and it will "warn" you when you try. However, you can open older versions in newer ones, and if you Save the VI, it will become "converted", and will no longer be readable by the original version. I recommend that you create separate directories for your different LabVIEW code repositories and try not to mix them up!
One final note -- by default, the last version of LabVIEW that you explicitly open becomes the "default" version if you double-click on a VI. So if you've worked with LabVIEW 8, have closed it, and then double-click a VI in your LabVIEW 7 folder, LabVIEW 8 will open (and potentially convert) it.
My preference, when I've had to maintain code with two different versions of LabVIEW, was to build a VM to hold the older version. That way, the code stays very separate, and I'm much less likely to make mistakes. I also recommend some form of code repository if you are planning a dual-version scenario to help you recover from the inevitable "Oops!" moment.