Im having the same problem right now, so please continue to post here with anything you find out about fixing the textures. By the way, my model im trying to get working is going to be used for an objective, and its a simple rectangle with a texture. too badd I cant just use a brush as an objective… 
Custom Models
I haven’t seen nor have I tested an exporter for max 8. Max 7 yes, but not max 8.
When I opened the md3 file that you E-mailed me, the path to the model reads:
F:/Documents and Settings/Daniel Higgins/Desktop/cannon.MD3
when it should read:
models/higgins_model/cannon.md3
The exporter most likely uses a “smart path” which if you make this directory location:
F:/Documents and Settings/Daniel Higgins/Desktop/models/higgins_model/cannon.MD3
…then the max exporter should automatically generate the proper model file path for use with Q3based games
(although I have not tested this exporter)
As for the texture issue, there are NO materials associated with your md3 file, NONE.
Have you succesfully exported to md3 from max 8 before and actually seen the model “in-game” ?
EB, download this md3 file and see if you can find the problems with it. Its a simple cube and I had all the stuff in the models folder, so it might be easy to find whats wrong this time.
http://www.league-of-lunatics.co.uk/box.MD3
By the way, ive not yet got a model to work by using max 8. The model shows up, but the texture doesnt.
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EB, it doesnt matter, I did some thing and it worked. I un ticked:
Use material names as shader paths
And it worked 
Now the model path is correct(so it does the “smart path export”.)
models/box/box.MD3
…but there is still no texture information, NONE.
edit
Good to hear you sorted the texture portion.
…and even better to know that there is a workable max8 md3 exporter.
can you post a link for archive purposes ? (maxplugins.de) ?