I'm unable to choose the lower than 4 version of SDK simulator in the simulator selection list in xcode4. There are iOS SDK 4+ (for iPhone) and iOS SDK 3.2 (for iPad) simulator versions only. I have set IPHONEOS_DEPLOYMENT_TARGET = 3.1 but nothing changes.
Seems like we need to download and install previous version of Xcode and SDK. All the versions could be found on Apple's developer site. Also, there is one simple instruction that can be found here: