In general, the answer to "Can I do M-bit arithmetic on a processor which has only N bits?" is "Certainly yes!"
To see why: back in school, you probably learned your addition and multiplication tables for only up to 10+10 and 10×10. Yet you have no trouble adding, subtracting, or multiplying numbers which are any number of digits long.
And, simply stated, that's how a computer can operate on numbers bigger than its bit width. If you have two 32-bit numbers, and you can only add them 8 bits at a time, the situation is almost exactly like having two 4-digit numbers which you can only add one digit at a time. In school, you learned how to add individual pairs of digits, and process the carry -- and similarly, the computer simply adds pairs of 8-bit numbers, and processes the carry. Subtraction and multiplication follow the same sorts of rules you learned in school, too. (Division, as always, can be trickier, although the long division algorithm you learned in school is often a good start for doing long computer division, too.)
It helps to have a very clear understanding of number systems with bases other than 10. I said, "If you have two 32-bit numbers, and you can only add them 8 bits at a time, the situation is almost exactly like having two 4-digit numbers which you can only add one digit at a time." Now, when you take two 32-bit numbers and add them 8 bits at a time, it turns out that you're doing arithmetic in base 256. That sounds crazy, at first: most people have never heard of base 256, and it seems like working in a base that big might be impossibly difficult. But it's actually perfectly straightforward, when you think about it.
(Just for fun, I once wrote some code to do arithmetic on arbitrarily big numbers, and it works in base 2147483648. That sounds really crazy at first -- but it's just as reasonable, and in fact it's how most arbitrary-precision libraries work. Although actually the "real" libraries probably use base 4294967296, because they're cleverer than me about processing carries, and they don't want to waste even a single bit.)