The plane classification for size and whether it is too small for a route are two variables that are not connected.
The designation of the size of the plane can be small, medium, large or extra large. These are manually configured by the game administrator and it will drive the overall staffing requirements for the plane type (i.e. you need more pilots for a XL vs a small). As there's some judgement involved, sometimes there's a line of differentiation between types, as is the case for the 707 and DC8. When those types were first produced, they WERE extra large AT THAT TIME, therefore, they have been classified as such within the game. However, over time, the average size of plane grows such that if they were launched 30-50 years after their actual in-service date, they'd probably earn a large classification instead. In short, a DC8 compared to a Connie or DC6 (both "large") makes sense as they're of the same era.
With regards to the "plane is too small" warning, that is driven by the average seat count across a fleet as was described by Kadachiman. The main reason for this mechanism is to eliminate a.... "gameplay mechanic" that used to allow folks to fly jets on long haul routes that were never designed to be flown on those routes. For example, A320's doing transatlantic flights. Due to that "gameplay mechanic", it allowed folks to attack airlines flying larger routes with smaller jets, ultimately making it a liability to fly a large plane on heavily contested routes. The warning is modeled on a scale, so if it is 99% appropriate it will get the same warning as 0% appropriate (we never know these values). The average number of seats for a given route needed to stay appropriate will increase over time - in GW4, the DC8 started receiving the warning on long haul routes in 1980 (as did the 707). Now, the warning is a bit conditional, as it will depend in distance as well as demand. Distance is a bit obvious, but for demand, in general, if you can fill demand with 1 small plane per day, then it will continue to be appropriate - so, a DC8 on a 5000nm 200 pax/day route will be fine but a DC8 on a 5000nm 500 pax/day route will be too small.
Regardless, I would suggest looking a bit harder at the economics of the DC8 as they become economically obsolete with the introduction of the DC10. Specifically, the DC8 (even the 63) costs more to fly any given flight than a DC10, while the DC10 can carry 50% more seats (aka 50% more revenue potential). Thus, even if you only have 200 demand on a route, you'r ebetter off flying a mostly empty DC10 than a full DC8.