I would like to know flow for following 2 cases :
1. 8bit MTA sending mail to 7bit MTA with Subject line in header having 8bit
characters.
RFC2822 says "A field body may be composed of any US-ASCII characters,
except for CR and LF." So, such situation is quite possible.
nope. US-ASCII characters are all in the range 0-127.
unencoded non-ASCII characters are illegal in message headers.
now they do sometimes appear, and when they do appear, you can use RFC 2047
encoding. but most of the time you don't have any reliable idea about what
the character set should be.
2. 8bit MTA sending mail to 7bit MTA with Message body text having 8bit
characters.
In this case, 8bit MTA will have to encode message body text into
base64/QP and send it as attachment to original header of message.
no, it should not be an attachment. merely changing the body from 8bit
to quoted-printable or base64 does not create an attachment.