The problem is that it doesn't just use the fact that T has an eigenvalue -- it uses that, plus the inductive hypothesis. And in order to prove it for this smaller invariant subspace, you need the fact that T has an eigenvalue on that as well. So there's the problem -- it's not enough to have an eigenvalue, you need an eigenvalue on every invariant subspace. (Well, perhaps you don't need one on every invariant subspace.) In the complex case you have this, since any linear transform on any finite-dimensional vector space has an eigenvalue. Here you don't -- the image of T-1 is the plane x=0, and though T preserves that plane, it acts as a quarter-turn rotation on it and thus has no eigenvalue when restricted.
As @Julien pointed out, every square matrix admits a $PLU$ decomposition, where $P$ is a permutation matrix. We have: $A = P \cdot L \cdot U$, such that:
$A=\begin{bmatrix}1 & 2 & 3 & 4 \\5 & 6 & 7 & 8\\1 & -1 & 2 & 3 \\2 & 1 & 1 &2 \end{bmatrix}= \begin{bmatrix} 1 & 0 & 0 & 0\\0 & 0 & 1 & 0\\0 & 0 & 0 & 1\\0 & 1 & 0 & 0 \end{bmatrix} \cdot \begin{bmatrix} 1 & 0 & 0 & 0\\1 & 1 & 0 & 0\\2 & 1 & 1 & 0\\5 & \dfrac{4}{3} & \dfrac{5}{3} & 1 \end{bmatrix} \cdot \begin{bmatrix} 1 & 2 & 3 & 4\\0 & -3 & -1 & -1\\0 & 0 & -4 & -5\\0 & 0 & 0 & -\dfrac{7}{3} \end{bmatrix}$
You could try manually cranking this one to find its $LU$ factorization. We want:
$L \cdot U = \begin{bmatrix} 1 & 0 & 0 & 0\\l_{21} & 1 & 0 & 0\\l_{31} & l_{32} & 1 & 0\\l_{41} & l_{42} & l_{43} & 1 \end{bmatrix} \cdot \begin{bmatrix} u_{11} & u_{12} & u_{13} & u_{14}\\0 & u_{22} &u_{23} & u_{24}\\0 & 0 & u_{33} & u_{34}\\0 & 0 & 0 & u_{44} \end{bmatrix} = \begin{bmatrix}1 & 2 & 3 & 4 \\5 & 6 & 7 & 8\\1 & -1 & 2 & 3 \\2 & 1 & 1 &2 \end{bmatrix}$
We start off by solving the first row, so we get:
$$u_{11} = 1, u_{12} = 2, u_{13} = 3, u_{14} = 4$$
The portion of the multiplication that determines the remaining entries in the first column of $A$ yields:
$$l_{21}u_{11} = 5 \rightarrow l_{21} = 5$$
$$l_{31}u_{11} = 1 \rightarrow l_{31} = 1$$
$$l_{11}u_{11} = 2 \rightarrow l_{41} = 2$$
At this point rewrite all the variables you solved for and then continue the process and see if you can solve the remaining variables. Of course it is easy to check the result if you can solve all of the equations.
So, we currently have:
$L \cdot U = \begin{bmatrix} 1 & 0 & 0 & 0\\5 & 1 & 0 & 0\\1 & l_{32} & 1 & 0\\2 & l_{42} & l_{43} & 1 \end{bmatrix} \cdot \begin{bmatrix} 1 & 2 & 3 & 4\\0 & u_{22} &u_{23} & u_{24}\\0 & 0 & u_{33} & u_{34}\\0 & 0 & 0 & u_{44} \end{bmatrix} = \begin{bmatrix}1 & 2 & 3 & 4 \\5 & 6 & 7 & 8\\1 & -1 & 2 & 3 \\2 & 1 & 1 &2 \end{bmatrix}$
Try solving for $u_{22},u_{23}, u_{24}$, and then $l_{32}, l_{42}$ and continue this process.
Best Answer
This is a CW post to note that I answered this question on MO. If someone upvotes this answer, the question will be removed from the unanswered list (and, since it is CW, I will not get extra rep).