X-Code 4.2 will have iOS 5 simulator and library only. If you want lower version simulator and library with X-Code just goto X-Code->Prefrences-> Downloads Tab. In downloads tab you’ll have two tabs:
1) Components – Here you will have option to download iOS 4.3 simulator(~600 Mb), iOS 4.0-4.1(~670 MB) Device debugging support, iOS 3.0-3.2.2(686.3 MB) Device debugging support.
2) Documentation– Yoy will have option to download iOS 5.0,XCode 4.2 Developer libaray,Mac OSX 10.7 Core Library.
Install the components which ever you need and there you go..Have you installed components this way??