Yes, that'd be the minimum it seems. It will be an issue, unfortunately. Since AppGameKit requires 2.3 minimum, it won't be a very useful tool for the Android platform for possibly a few years due to the market saturation and userbase of 2.2 and older builds of Android. 2.3 just won't be a solid baseline for quite a long time to come (it would be like requiring DirectX 12 for your PC game -now-). Apps can certainly be developed in the meantime though in preparation for more widespread use of 2.3.
I'm sorting through the problem myself at the moment. None of my (3) Android devices have 2.3, all are 2.2, and none have an upgrade path to 2.3 yet. So I'm on the hunt for a new test phone... many of which don't even come with 2.3 either, lol, so the list of options is narrow.
Quote: "How do I update the OS (as you can see I'm not smartphone savvy)?"
You'll need to apply a firmware update, which should be available from the manufacturer. It is a dangerous process that can turn your device into a paperweight, so it's important to read up on the procedure carefully so you'll know what you are doing and reduce the risks.