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Which Android SDK should I use?

I developed a free app using Cupcake (1.5), though I want to make another app that runs on the broadest selection of android phones. Should I make the new app using the Cupcake sdk given that newer versions of android are backward compatible, or should I update to the Froyo sdk?

If I update to Froyo, is setting the manifest to "android:minSdkVersion=3 android:targetSdkVersion=8", and not using the new apis all that is required for backward compatibility?
 
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