If I am currently developing an SDK module for an Android application, do I still need to set my targetSdkVersion to 26 from now on in order for the client application to approve (from Nov 2018)?
Short answer: No. From the developers post the app is the only thing required to be targeting API 26.
What could happen is the following scenario: imagine that your module is targeting an old API level and uses a deprecated method. If your app targets a more recent API where that method was removed, your app may not compile.
Hope this can help you. Cheers!