What I do is set my app to build against Android 1.6, then I set the minSdkVersion in the manifest to 3 (which tells the Market to let Android 1.5 phones install it, and the targetSdkVersion to 4 (which tells phones with Android 1.6 and up that I've already tested it on 1.6 and not to give it any forward-compatibility help). By building against 1.6, Eclipse won't let me use any 2.0 APIs, but I know that it will still work on 1.6 and 2.0. It also won't let you automagically install it on a 1.5 emulator, so I export a signed APK and then use the "adb" tool that comes with the SDK to install it on the emulator via the command line, and hand-test it to make sure it's not stepping on any 1.6-specific APIs either.
The reason I don't build against 1.5 is that there is stuff only in 1.6 and up that I need to use, that 1.5 will safely ignore, and that is support for multiple screen sizes. I can include larger assets meant for the Droid screen in res/drawable-hdpi and have Droids autoload those, but if I'm building against 1.5, Eclipse doesn't know what I'm trying to do.
I hope I didn't make that sound too complicated, because it actually isn't - the Android SDK and resource framework makes it surprisingly easy to handle multiple screen sizes and platform versions. Just understand what it is you're doing, and use screen-independent pixel units in your layout XML, and you'll be fine.