Repaid and rather embarrassed about it (8)
I believe the answer is:
requited
'repaid' is the definition.
('requite' can be a synonym of 'repay')
'rather embarrassed about it' is the wordplay.
'rather' becomes 'quite' ('quite' can be a synonym of 'rather').
'embarrassed' becomes 'red' (I've seen this before).
'about it' means one lot of letters goes inside another.
'quite' going into 'red' is 'REQUITED'.
'and' is the link.
(Other definitions for requited that I've seen before include "Paid back" , "Returned as love may be" , "Repaid appropriately" .)