I've never used SolidMech, but it may be possible to manually edit (using a hex editor) one or more of SolidMech's files to work with SW'08. I have done this with another "insert into SolidWorks" type 3D model catalog. Fortunately, (almost) all previous version API calls still work in the latest version of SW, so most likely all you have to do is trick the program into thinking it's talking to an older version of SW.
Anyway, I would be pretty certain that SolidMech uses a SW API call to determine the version. SW reports its version with a number in a string. If you can get SolidMech to accept that new number, you may be able to continue using it.
I would assume that SolidMech uses some DLL to attach to SW and insert your part. If you can locate that DLL, and (again, using a hex editor) find where the value is stored that SolidMech is looking for SW to report, you may be able to change that number and get it working again.
It may be possible to figure out what DLL is trying to connect to SW by examining the Processes tab of the Task Manager. Watch the processes while you try to use SolidMech. When the error message comes up, the latest addition to the processes list may well be the DLL you have to modify. I think that's how I found the one for my 3D catalog.
I wouldn't mind taking a look if someone knows a place where SolidMech is available for download. I guess it's not free anymore, though.