Why is the transaction fee a multiple of the amount I want to send? I tried sending 0.0001 BTC from my blockchain.info wallet.  It deducted 0.0009 BTC from my account, including a 0.0008 BTC is transaction fee.

Is it correct that the transaction fee is 8 times larger than the amount sent?
That's the recommended fee, the recommended fee is like the minimum amount to get your transaction included in a block ASAP. You should be able to set fees, but for small amounts like that a fee that large is common, remember, miners can only include so many transactions a block every 10 minutes, so they pick the transactions with the largest fee and smallest txn size.