Developer should note that the update does not mean apps can no longer be developed for Windows Phone 7.5. As Microsoft note:
Most importantly, any Windows Phone apps that you build using the Windows Phone SDK (with this update installed) still target and run on Windows Phone 7.5. This update simply makes it easier to test how your apps appear on devices running Windows Phone 7.8.
As such, it would seem logical for all developer to install this update, even if they are only pondering optimising 7.5 apps for 7.8.
Microsoft has published a number of articles aimed at helping developers make the most of the new Start Screen features in Windows Phone 7.8. This Windows Phone Developer Blog post covers the basics of what is in the update and the Live Tile options available on Windows Phone 7.8; while this article explains how apps maintain backward compatibility despite having new functionality (reflection).
Windows Phone 7.8 is currently only available on new devices (e.g. Lumia 800, Lumia 510). Some new device are also still shipping with Windows Phone 7.5 (depending on stock levels). However, the update for existing devices is expected to be made available with the next few weeks, although the roll out period will likely cover several months, with some (operator locked) devices taking even longer to receive the update.