Index Shifting Problems

I purchased an older used bike that is equipped with Paul Thumbies
shifters, a Shimano RD-M739 rear derailleur and a nine speed cassette.
I can't get the indexing to work properly (have tried clamping the
cable on either side of the screw) and wondering if that is because it
seems that the derailleur is an 8 spd one. It does shift ok across the
complete range of the cassette in friction mode.

If I need to purchase a new derailleur (because I want the indexed
shifting), would one like Shimano's RDM510A (that can be purchased
from Nashbar for $18) be a good choice? I need a long cage derailleur.

TIA,
Harry