I must be missing something. Help! My manifest contains:

<manifest ...>
    <uses-sdk android:minSdkVersion="4"           
          android:targetSdkVersion="7"          
          android:maxSdkVersion="10" />
    <application ...

I have all API packages installed (through 7 - Android 2.1). Whenever I try to run or debug my app in the emulator, reglardless of which version I start, I get the message in the subject line and I have to click on Cancel in order to continue. After that, the device chooser appears:

and I can select a device and the app starts up fine in the Emulator.

What do the red Xs mean next to the target? When my Nexus One is cradled, I do not get the warning that there is no compatible device.

I can live with the extra click, but I am concerned that my up does not properly register the target API level and that this will cause problems once uploaded to the market.