I just installed Windows 8 on a virtual machine using VMWare and I'm trying to use fiddler to capture HTTP Traffic and I'm unable to do so. I have set the network settings to NAT but that does not work
Fiddler is an HTTP proxy. You need to use something like WireShark, which will capture traffic at the driver level (technically at the "NIC" level but a VMware virtual adapter isn't a physical device...).
You could point the guest to use your proxy, but it doesn't HAVE to... there's nothing enforcing that all TCP/IP traffic in the guest must go through your Fiddler proxy. The only way to ensure that it happens is to install a netfilt driver (such as the one that comes with Wireshark) which sees every packet that goes through your network driver.