You can do what Google recommends and does themselves with their market based apps... Target either 1.6 or 2.1 based on what APIs you need. 1.6 apps will work

You can do what Google recommends and does themselves with their market based apps... Target either 1.6 or 2.1 based on what APIs you need. 1.6 apps will work with all later releases just fine if you don't need a 2.1+ specific API.