XMM-Newton observed the accreting millisecond pulsar SAX J1808.4-3658 during its 2008 outburst. We present timing and spectral analyses of this observation, in particular the first pulse profile study below 2keV, and the high-resolution spectral analysis of this source during the outburst. Combined spectral and pulse profile analyses suggest the presence of a strong unpulsed source below 2keV that strongly reduces the pulsed fraction and a hard pulsed component that generates markedly double peaked profiles at higher energies. We also studied the high-resolution grating spectrum of SAX J1808.4-3658, and found several absorption edges and oxygen absorption lines with whom we infer, in a model independent way, the interstellar column densities of several elements in the direction of SAX J1808.4-3658.