I'm trying to apply PIE.htc to the ::before pseudo element, but it's not working in IE8 (right hand navbar).

Here is the CSS:

.navbar .current-cat:before{
content: "";
position: absolute;
top: 10%;
left: -35px;
background: url("images/elements.png") no-repeat scroll 20px -98px #dbebf2;
border-radius: 50%;
display: block;
height: 45px;
width: 45px;
/*rotate the arrow */
-webkit-transform:rotate(180deg);
-moz-transform:rotate(180deg);
-ms-transform:rotate(180deg);
-o-transform:rotate(180deg);
transform:rotate(180deg);
}

I tried removing the rotation, the position, the background - but nothing helped. Can PIE.htc be used on pseudo elements?

No, unfortunately. The reason is that pseudo-elements have no DOM and therefore there's nothing that PIE can manipulate.