This fantastic post helps clarify how to fix this problem for a single project.
Install xCode 3.2.3 w/ iPhone SDK 4, get "Base SDK missing", can't see other SDKs
However, it seems I have to do this little dance for every project with sample code I download. I didn't mind for the first two or three times but it's now getting hugely repetitive and boring.
Isn't there a permanent way of resolving this?