Ok so I increased the flash compensation and that makes a world of difference. Pics look perfect now. I can drop the ISO to 1600 at 1/200 second and f8 and I'm getting much brighter photos.
Only thing that bugs me is that the exposure meter still reads way under exposed even with the test beam it uses for flash. Once I take the shot I'm getting much nicer and sharper shots.
I'd lower the shutter to be able to bring in more ambient light on the background and lamps in the pictures.
I'd work between 1/60-1/125sec. 1/200sec will effectively cut out all ambient light compeltely and your exposures are going to rely on flash 100% -- especially coupled with the aperture settings. This is probably why you're having to increase the flash comp, it's probably firing closer to full power. What happens when youre in a room thats much bigger than youre currently testing?
What that said, why are you shooting at f/8? It's good to know they'll turn out when you need them, but I dont think youll need that much DOF in most cases. Just making your flash work overtime and have to light up both the subjects and background. If you can get away with just having to put light on your subject, and then a little on the background then I think more power to you -- no pun intended.
Here's another exercise: In the same room, take a shot at 1/200sec, f/8, and ISO 1600 WITHOUT the flash. Is the image anything but black?