You should probably try to target the earliest android version that you can- but its not actually worth going back beyond a certain point.
Visit http://developer.android.com/resources/ ... sions.html
to see what the ecosystem of versions is like based on devices that accessed the market. They update this fairly reguarly. You should be fine if you set the target to 2.1 or higher now. Don't assume everyone has the latest version (2.3), since some people can't upgrade for various reasons, and it takes time for vendors to push their specific builds out to their users.
Also, don't set a max sdk version unless absolutely necessary.