Not sure about PSE8, does it read XMP files at all? If yes, the XMP sidecar files produced by FPV are completely XMP-compliant and all XMP-aware applications should be able to read them (Lightroom, Photoshop, Bridge, PhotoMechanic, IMatch and IDImager certainly do). FastPictureViewer is also able to update any well-formed XMP file to change or add XMP metadata elements so inter-operability should not be a concern, save for the usual glitches like the XMP Label names used, which should be matched across applications.
Does your version of PSE read your particular type of CR2 files? The XMP behavior is entirely defined by the applications: it is possible that PSE only read XMP with reading raw files that it actually support, and only looks for rating within JPEGs when handling those files regardless of the presence of a sidecar? There may be preference options to alter the default behavior.
You can configure FPV to write a sidecar and/or write inside JPEG/TIFF/HDPhoto, which should cover all common use cases i.e. JPEG with embedded XMP, JPEG + Sidecar, RAW + Sidecar, JPEG + RAW + Sidecar, JPEG with embedded XMP + Sidecar and JPEG with embedded XMP + RAW + Sidecar, depending on the program settings and the type(s) of files created by the camera. The only cases that FPV does not handle by choice (at the time of this writing) are those involving the embedding of XMP data within RAW files, which is a risky business.
You can use for example ExifTool to migrate your XMP sidecars to within your JPEG files if desired, or create file management rules with FPV's File Utilities
plug-in (Ctrl+F), like "Where the file type is "JPEG" and the image has an XMP Rating equal to 5 and the image has an XMP sidecar then set its XMP Rating to 5 stars.
", which does not seem to do much, but will actually write your the rating inside the JPEG files, if the appropriate option is checked in FPV's preferences.