The only real way to combat version fragmentation is to slow down the pace of development, a tactic that would probably be detrimental to Android's competitiveness and long-term viability. Google's aggressive pace of development has allowed Android to evolve from the mediocre me-too effort that it was at launch into the extremely compelling, top-notch platform that it is today. It's on a trajectory to leapfrog Apple's iPhone operating system, but it's only going to be able to do that if Google keeps pushing forward at breakneck speed.
Google is faced with a tricky balancing act, because it will be difficult to keep up this pace without alienating existing users who are stuck on older versions of the platform. It's also increasingly clear that some of the hardware vendors, with their inability to roll out timely updates, are a major factor that contributes to the problem.
This is partly due to lack of incentive (they would prefer to sell you a new device rather than add new capabilities to an existing device), but it's also partly Google's fault because the search giant routinely waits until after a new version is launched before it makes all of the new source code public. Increasing the transparency of development and moving from the code-dump "cathedral" model to a more inclusive "bazaar" model would make it easier for handset makers and mobile carriers to prepare for updates concurrent with Google's development process.
Fragmentation isn't going away any time soon, but I don't think that the resulting compatibility challenges are seriously damaging to Android. Google has found practical ways to minimize the impact of fragmentation and to keep the broader Android ecosystem marching to the same beat. The advantages of forward momentum arguably outweigh the cost of version fragmentation, but there are still steps that Google can and should take to encourage device makers to roll out updates.
I finally gave it when Cyanogen managed to get the Eclaire to work 
