On Premises Power BI Server

• Is it possible to apply Row Level Security in an On Prem Power BI instance? Probably not from what I have read. The way out could be to create a tabular model/ cube to control the security. Seems more of an overkill to create a cube for implementing security only.

The RLS feature in PowerBI Reports is not yet available in the server. However, as you mention you can use the data sources RLS support by connecting to a remote AS instance or creating row-level filters based on the AD identity connecting to your data store. 

• If the on prem reports need to be accessed by 8000 users we would have to maintain 8000 AD accounts (to login to Power BI/ O365 ) which would be quite a big overhead. Are there any other options possible to not have 8000 AD accounts and still distribute the confidential report to 8000 users.

Report server uses windows auth single sign on for users connected to the same domain. If you are looking for lots of users to connect to from outside your domain, suggest using PowerBI.com or AzureAD connect to mirror your accounts between AAD and AD.