I would like to tether over wifi rooted Xperia X8 running Android 2.1. I used wifi tether app but I just saw error message "Sorry, but your kernel does note have all necessary feathers for running this application." What kind of setting should I change?
Download Barnacle Wifi Tether This app will load it's OWN drivers and actually use your phone as a modem. I have used it once before with my X8 Android 2.1 also.
Alas, it's not possible officially.
As the message told you, there are dependancies on the running kernel. This belongs to the core of your phone's operating system and is only meant to be upgraded by official updates from Sony Ericsson. Your current firmware is however already the latest version Sony Ericsson provides for the X8 as it has reached end-of-life update-wise. Hence, you cannot do anything about it except installing a non-official community mod.
For the sake of completeness: Such a mod exists, see this for an example. However, it's not an easy path to get it working initially. I would suggest you refrain from installing it if you have concerns to void your warranty and don't want to end up with a broken device.