Since you're using the pre-compiled kernel, all you have to do is download the appropriate kernel-headers package, and THEN MAKE A LINK TO IT.
So in the case of 'kernel-image-2.6.8-1-k7' you need to 'apt-get install kernel-headers-2.6.8-1-k7' then run 'ln -s /usr/src/kernel-headers-2.6.8-1-k7 /usr/src/linux'
Then it will find the proper headers for that kernel and will install. Though for some reason, it didn't like it when I tried to install the nvidia kernel module using the nvidia installer. It would just go up to 100% and say that the nvidia kernel module would taint the kernel, then the installer stopped. Though it worked just fine with the 2.6.7 kernel. I'm using the 686 variety now, and it works great.
Also as a side note... there IS an EASIER way even.. .:-) go to this site
And you can install the proper modules for the kernel images with just apt-get.
Hope that solves all your problems. It solved mine.