To answer your question first: Yes, all the stitches have to stay on the needle.
8-inch long straight needles do sound a little short to make a full-size blanket. It's okay if your needles are a little shorter than the width of your project, because you can "bunch up" the parts of the row you're not currently working on. But the shorter they are, the easier it is for stitches to slip off - and that's just one more thing you shouldn't have to worry about if you're an inexperienced knitter.
Blankets don't have to be knitted in pieces and then sewn together, but it's an option if you want to do it that way.
And lastly, the advice you didn't ask for: For large heavy projects like blankets, lots of knitters prefer circular needles. You don't have to join the ends to make a tube; just switch the needles back and forth at the end of each row as if they weren't connected. With circulars, the weight of the piece hangs on the cord (and sits in your lap), rather than your having to hold it all up with one hand at a time. It's easier on your wrists. Also, there's much less chance of the stitches slipping off.
If you feel like investing in more needles, I recommend Denise interchangeables - you get 11 sizes and various lengths in one package, and they can be used as circulars or straights. They're almost the only needles you'll ever need.