Okay so this doesn't really have much to do with code help but I am just starting my final year project and will be developing preferably for Android mobile devices. The plan is to create it in Android 2.1 as I only have a used HTC hero but my testers have a mix of version androids. and not many have a new HTC One or new Nexus, so i presume that they are all using older versions of the OS.
So what I need to know is, will I be able to create the application in 2.1 and it run on new versions of the OS (preferably phones not tablets, if it matters)?
Yes, you absolutely can! No issues with that, as far I know.
When you are building your application, in the Manifest file you declare the MinSDKVersion which specifies the minimum Android OS version needed to run your application. Your application will run on all devices which are above or exactly the minimum SDK version specified.
There is no limit on the maximum version which can run your application.