Will AIR 1.5 work with Android? if not which version of AIR should be used with Android?
No. Air for Android is at version 2.6. You need to use the v4.5 of the Flex SDK to do mobile. Flash Builder 4.5 was released last week.
And also, Can i configure my Flex Builder to partucular version of AIR SDK?
Yes. At least in v4.1 and above, you can. (I've never used anything before that, but I'd guess you can.) You can download as many SDKs as you want. You can set Flash Builder to use any SDK as a default (Flash Builder -> Preferences -> Flash Builder -> Installed Flex SDKs) and any individual project can override it. (File -> Properties -> Flex Compiler -> Flex SDK version)
I am getting confused with AIR 2.0, 2.5 and recently released flex Hero SDK for mobile platforms. Can any one please help me . It would be greatly appreciated.
I understand the confusion. I think the best way to go is download the latest version of Flash Builder 4.5, which includes the Flex 4.5 SDK and Air 2.6 for mobile. Load up your project. You will probably find that from Flex 3.5, there are many things that need to be changed.
For one, there aren't a lot of MX components in mobile. The are pretty much all Spark components. But that is not as bad as it seems.
Although you can probably port a lot of code over to your mobile project, you will want to create a new UI for your mobile project. Unless your existing Air UI was designed for small screens and touch, the UI won't translate well. From a User Experience perspective, you will want to re-write your UI anyways. The bonus, though, is that most your non-UI code should port easily, and all of that is completely re-usable.
I hope, for your sake, that you have a good separation already between your UI and your behavior... it will make this whole process a TON easier. If your AS3 is tightly embedded within your MXML, you will have a bit more work to do.
Good luck :)