"context surrounding the myth" and "what was going on at the time" don't match up well for me. Does he want to know what was actually happening in Italy in the 8th century BCE? Or how the myth maps on to what we think was the real history of the site by the Tiber?

Very briefly on the area around Rome in the 8th century. Rome was a part of the "Latial" culture, (or culture of the region of Latium), where (in general) speakers of the "Latin" subbranch of Italic had settled. As I've mentioned a lot elsewhere recently, there was a shared culture between the Latins, the Umbrians, the Etruscans, and other denizens of central Italia during this time.

If we zoom in on the eastern banks of the Tiber: from about 1000-750 BCE, the region is dotted by small villages, some as close as a half a mile from each other. They build simple, ovoid huts, and bury the ashes of their dead in little ceramic replicas of these huts. The bury according to family or tribal membership (so it is at Osteria dell'Osa). Their pottery, hand-made and "coiled," and their fibulae (dress pins, of rough but forged iron) are both simple and slow to change, and when they do change, it is generally a mimicry of changes in taste further north, in Etruria. Unlike the most powerful of the Etruscan centers, Latium is not situated among rich metal deposits, and so is fairly poor in comparison. Its economy is agrarian-focused, and there is little evidence that the land was visited by Phoenicians or Greeks.

The founding of Rome is traditionally dated to 753 BCE. From around this date (the middle of the 8th century), the simple huts of Latium begin to be replaced with masonry houses on stone foundations and with tiled roofs. Rich "warrior graves" with extensive metal artefacts begin to appear in the area, including the two famous examples from Praeneste. Social stratification becomes more obvious in the archaeological record, precisely as happened in Iron Age Greece at bout the same time. By about 600 BCE, rich graves begin to disappear. The common interpretation, borrowed again from Greece, is that the people had begun to prefer to expend resources on the living rather than the dead. This is a "social step" which often accompanies urbanisation and the formation of early city-states.

From this point, villages began to coalesce to form the first Latin towns. The urban centers of Latium were, in general, smaller and less connected than their Etruscan neighbors to the north, though both shared similar developmental traits. Some of the Latin towns, including Rome, came under the political dominion of power Etruscan factions. In this period are Rome's Etruscan kings, the "regal" period.

You should check out Forsythe, A Critical History of Early Rome (Berkeley 2005). If you pm me, I can help you get access to this source.