Anyone installing apps on their phone will probably expect software updates. If their phone they bought a year ago won't work with the latest versions of their favorite Android Market games, due to requiring a newer version of Android, they'll notice.
I don't know that end users would end up noticing.
I certainly haven't (with the exception of trying to use a G1 after a Froyo device). When I got the Froyo to Gingerbread upgrade on my G2 there were many improvements, but nothing I noticed that affected third-party apps. Even many of my favorite apps that use Honeycomb features (e.g. Plume, Kindle, Google Music, Firefox, etc.) seamlessly support older devices.
Google has been pretty good about putting out compatibility libraries for major new APIs (e.g. Fragments) and there's a lot of support for checking the presence or absence of various features / APIs / etc. These days, there's even support in the Android Market for having different versions of the same app for different OS versions.
Supporting a range of OS versions is certainly work, but I'm not sure how much more work it is beyond supporting a wide variety of form factors, different hardware features, etc. In any case, the good developers seem to be able to handle it.
