The pdp8/e came out in in about 1972. By then, DecTape and disk-based systems were dominant for code development. Predecessor CPUs, the 8/I, 8/L, and "Straight 8" all had disk and tape technology available. The only reason one would still have been doing paper tape-based development (guilty--smile) was the cost of getting a disk added to the computer you were using.
Later versions of OS/8 do support upper and lower case (e.g., v3d does) but any one application might not (e.g., PIP?). I seem to recall a monitor SET command that would have OS/8 force lowercase characters into their equivalent uppercase. HELP SET or HELP SET TTY: should be able to reveal it. The opposite command would tell OS/8 to pass through lowercase but then the application receiving it might not recognize it.
-- steve