"I always see 16 bit address buses, but never any 8-bit. Is there a reason for this?"
what exactly do you mean?
movx a,@r0 will
1) put the contents of R0 onto P0
2) strobe ALE
3) set P0 for input
4) read what is on P0 to the acc

I believe that the problem is hardware.
1) what are you using to decode address 3 and enable the output fom the encoder.
2) you are (hopefully) aware the there is no pullup on P0
3) is all other devices feeding P0 disabled on detecting address 3
4) scope the !OE signal on the 2020 verify polarity and actvity

Try to just read the device, ignore your calculations, does it always read the same or does it vary.

Have fun,

Erik

PS keep using ALE