You're probably using the vim-tiny editor that doesn't support arrow key navigation in insert mode; Ubuntu 8.04 doesn't have the
vim package installed. Install this, and update your default version of vi:
sudo apt-get install vim
sudo update-alternatives --config vi
Select "vim.basic". You may also want to do this for editor (replace vi in the command above with editor) so the default editor called by other programs (like visudo) is also the right version of vim.
I also advise getting in the habit of hitting ESC from insert mode and using
hjkl navigation common to Vi/Vim, rather than using the arrow keys.