Haven't had much contact with the Xperia E1, but it really comes down to the interface -- you're choosing between Android and Windows Phone here.
The E1 will have access to more apps, but a dual-core 1.2GHz phone with 512MB of RAM won't be super-quick running Android. Windows Phone has a smaller (if increasingly healthy) ecosystem, but it runs well on the 8S. I'd be sorely tempted to get the 8S just because it may *feel* like a nicer phone between the performance and its design.
The key problem with the 8S however is the 4GB of storage. There is not a lot of space for the OS and its updates, as well as the apps you want to install.
Definitely a fair point. It's not too big an issue if you're shopping in this price class to start with, but it means you won't be lugging a big media collection with you.
Actually media isn't the issue, since there is a MicroSD card slot. It comes down to apps and their cached space. In Windows phone 8 before GDR2 there was no way to clear that cached data or "other" storage.
And to update to GDR2 one needed to uninstall their apps so they could fit the update file :(