Would it be possible to host a cvs server on the wl-500g?
Yes. Don't expect performance of it though..
would it be enough for 8 clients ?
CVS is mainly I/O to and from the HDD. This has 11 Mb/s bandwith which is uncomparable with servers normally used for CVS. I don't think anyone can give you an idea about perfomance without an actual test.
So, try it and let us know how it went.