Need to clarify on that.

The size of the block created by a miner is 1 MB. The idea is that blocks of 1 MB are propagated faster then, say, 8 MB blocks, thus limiting the chance of a fork.
Once the block has been propagated, the block stored indeed is 8 MB. Though my guess is that this can be improved. The initial idea is increasing the number of transactions per block while keeping block propagation time stable.