The base SDK is what you build your app against (i.e. include and library files and frameworks). As you say, it doesn't affect the deployment target, except that base sdk >= deployment target.
You specify build settings on 2 levels as each project can have multiple targets and you might not want the same settings for all targets. The project-level settings override the default settings and the target-level settings override the project-level settings.
For example I have projects with both OSX and iOS targets and some are ARC and some are MRR. I'd have to have different projects for each if I was unable to specify build settings with the level of granularity that Xcode allows.