Your instincts are correct here I think. If you're writing games then I suspect this is pretty accurate. You'd likely have to purchase a lot of test devices and do a lot of tuning to keep up with the hardware. Android vs. iOS game dev strikes me as a lot like the difference between windows and console game development.

If, however, you're writing basic apps like I am and using the standard development tools then it's a lot less of a hassle. I primarily write appwidgets (apps that run on the home screen). Theoretically these have could run into more fragmentation issues since various manufacturers have built their own home screen replacements and improved appwidget capabilities have been a focus in 3.x, 4.x. Yet in about 2 years since I started I've rarely hit a device specific issue and I'm supporting 2.1 - 4.x. I have about 3000 active users so not exactly large scale, but enough that if it were a serious issue I think I'd be hearing about it more.

I have two devices - a nexus one to test on 2.x/phone and a transformer prime to test on 4.x/tablet. Other versions I spot test in the emulator (admittedly this is awful). That's been sufficient for me.

I'm sympathetic to the technical difficulties of developing and maintaining a high quality game for the platform, but that shouldn't scare anyone off from developing regular apps.

Interesting. The apps my clients have asked me to write so far are pretty straightforward so maybe I could also get by with only a few devices. I'm certainly not doing anything that pushes the hardware as hard as a game.