It is not all about the height and width of device. Android layouts are not static and you are not supposed to give a fixed height and width to your application interface. Rather you should use layouts specifying as wrap_content or fill_parent type of relative sizes so that they fit into all devices.
Further, you should specify layouts for low, medium and high density screens so that it can behave properly in most of the devices.
Now to the API version, as a developer, you should try to ensure that maximum people can use your app. You will want to ensure that your application can run on devices that have version 2.3.3 installed as well as ICS installed. In order to achieve this, it is advisable that you develop targeting 2.3.3.