After experimenting a bit, it looks like porting to Android 1.5 isn't too hard. There are a few missing APIs compared to the newer SDK, but for the most part that's ok. Here's a screenshot of Core Damage running in the Android 1.5 emulator:
Sound is working as well. Internally it looks like there's some missing OpenGL functionality as well, so I'll have to do some exploring to see what that means for the Corona rendering engine. Also, I don't have a device to test it on, although someone in the office has a 1.6 phone. I'm sure we can solve that problem.
Nonetheless, this is an exciting development, as it opens Corona's horizons much wider! We should be able to get this into an upcoming Corona beta update in the next couple weeks.