If you write actionscript I would suggest starting to use version 3. It might seem more convoluted at first, but in many cases it actually makes coding easier. For very simple things it means that you may have to write more lines of code and if that is the case using version 2 is fine. For more complex projects though it makes it easier to write more efficient and cleaner code. At least that has been my experience. I was hesitant to use it at first because it was a pain to learn the new syntax, but it is definitely worth it for me since I have been writing a lot of actionscript lately.
The changes to version 3 make it compliant with the ECMA-262 standard which actionscript is based on. Also actionscript 3 code executes much faster than previous version because of the new virtual machine that runs it. The reason you can't use version 1 or 2 code is because the new virtual machine does not understand that code.