How strict should referees be about distance at U8 restarts?

Honestly, at U8, keep the whistle in your pocket as much as possible. These kids aren't trying to cheat, they're just desperate to get to the ball. If you start blowing up for every yard of encroachment, you’ll kill the flow and spend the whole game talking rather than letting them play. I’d just give a quick shout of 'back a bit' or 'let him play' during the game to nudge them. If it’s really stopping them from restarting, tell the player with the ball to just go anyway—they’ll soon learn to drive into the space while the defender is still scrambling. Let the game teach them the distance naturally, and don't make it a formal law-enforcement exercise.