Turns out to be a bug in SDK Rev. 20.

http://code.google.com/p/android/issues/detail?id=33859


On Friday, June 29, 2012 3:17:43 PM UTC-4, John Langan wrote:
>
> I upgraded Eclipse yesterday with the latest updates. I installed Android 
> SDK Tools Rev 20,  Android SDK Platfom-Tools Rev 12 and Android 4.1 API 16.
>
> Now when I try to create an Android Project I get as far as the Install 
> Dependencies panel where it claims a template is needed but not installed:
> http://developer.android.com/sdk/compatibility-library.html, Required 
> version: 8
>
> If I click the Install/Upgrade button it installs SDK 2.2, API 8. This 
> makes no difference as I still get the same message and can go no further 
> in creating a project.
> Any help on how to resolve this problem would be much appreciated.
>  
> John.
>

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