The Keystone Air Service Piper PA31-350, registration C-FXLO and operating as flight KEE208, departed Thompson, MB (CYTH) on an IFR flight to Winnipeg, MB (CYWG). Shortly after takeoff on Runway 06, the crew experienced a malfunction and alerted the Thompson FSS that they were eturning for Runway 06. The aircraft collided with terrain approximately 1 nm southwest of CYTH. EMS crews responded to the scene and all 8 occupants were taken to hospital with varying injuries. TSB investigators have been deployed.