I just upgraded to the Android 2 SDK. (I was at v1.5) I believe I followed all the instructions correctly, I installed the new SDK and then went into Eclipse and ran a software update from dl-ssl.google.com/android/eclipse. But when I then went to create a new project (after restarting Eclipse) all I had to choose from were 1.5 Android projects.
To be honest, the steps for upgrading the SDK could be a little easier so it's entirely possible I missed something. I'm glad Google has an auto-update feature starting with Android 1.6 but unfortunately I'm out of luck since I'm on 1.5.