PCF8574 Remote 8-bit I/O expander for I2C-bus

You could do that... Or you could get yourself a handfull of 4511 chips. It's a display driver that can convert a 4-bit number to the signals a 7-segment display needs. It has build-in latches to keep digit on the display, even if you turn off or change the input. What you do is:

 Connect the 4-bit input of 4 4511s to bit 0-3. Bit 4-7 is connected to the EL inputs of the 4 chips, one for each input. You then do:

Set the first digit on pin 0-3, set bit 4 low and 5-7 high to turn EL low on the first chip and high on the other three.  This will make the first display show the digit. Then you turn bit 4 high. This will store the digit in the latches of the 4511. Then you select the next digit on bit 0-3, bit 5 low and 4,6,7 high. Then turn bit 5 high to store the second digit on the second display etc. Did this make sense? The bottom line is, that by using some external drivers, you can connect 4 displays to an 8-bit output, instead of just 1. Read about the 4511 here: http://www.doctronics.co.uk/pdf_files/4511.pdf

The PCF8574 appears to need to be configured to an address, by tying the pins A2, A1, and A0 either high or low according to what you want. The PCF8574A starts at address 0111xxx0 where xxx depends on what you wire A2,A1,A0 as. The PCF8574 starts at address 0100xxx0, shown on page 8 Figure 9. What I read on the PICAxe I2C tutorial page 4  is some commands you are probably already familiar with, working with the I2C EPROM before. It looks like the writei2c command can be used, as in :

i2cslave %0111xxx0, i2cslow, i2cbyte  ' for PCF8574A at address 0111xxx0

writei2c 0, (00000001,00000010,00000100,00001000,00010000,00100000,01000000,10000000,11111111)

I'd guess that code to run each of the IO pins individually on and off at a rate near 12 kHz, to lastly leave them all on til something else was sent. You could have a meter check the last, or have a slow loop that turned on each pin in turn for a second or so, before going on to address the next. The data sent might need a % in from as in %00001000 as that may be what the PICAxe uses.The readi2c could be used if you wanted to read what the pins are set from some external sensors or switches.

I was guessing that the latched outputs meant that they stay set as the last data byte sent. It appears that they only stay "latched" for roughly 9 clock pulses at 100 (or 400) kHz from Figure 10 (page 9). I kinda wonder what sending just one byte would do, to see if it would hold it longer, but would really only expect it to hold it for that 9 100kHz clocks, after it had been sent. Something like :

i2cslave %0111xxx0, i2cslow, i2cbyte  ' for PCF8574A at address 0111xxx0

writei2c 0, (%00000001)

What you have done already may be the only answer possible, to get a sustained high or low on any one pin. If you divide up 100 kHz by 9 first, you get 11 kHz, which inverts to 9 microseconds for the time it takes for holding 1 byte. It might be possible to send out servo pulses with 9 usec resolution, which would give 11 different servo positions between 1 and 2 ms. Or if shifting to 400 kHz data rate, there should be a 4x resolution, for 44 or so positions. What I'm picturing is sending a continuous data stream for 2 ms of what you want 8 servos to be positioned at, then resting 20 ms to do other chores, then sending another 2 ms of data. That would be 22 bytes or so at 100 kHz, or 88 bytes sent at 400 kHz.  The first 11 (at 100 kHz) would be all ones to get to the minimum 1 ms for the servo, but the rest could be whatever wanted for an individual servo, up to another 11 ones for the far end of the servo swing. Think that might be right, don't have a way of trying it out.