[android] How to set android layout to support all screen sizes?

I am developing a program on android version2.2. I have read many documentation on supporting multiple screen sizes but still confused. I designed a layout file, that supports for large and normal screens, when am trying it with small screen it is not adjusting the layout to fit the screen. I used this code in the manifest also.

<supports-screens 
        android:resizeable="true"
        android:smallScreens="true"
        android:normalScreens="true"
        android:largeScreens="true"
        android:anyDensity="true"
        />

The image for the small screen is here. How can I set the screen that compatible with small screen? Somewhere I found by using the folder "layout-small" but if I use this, the project size is increasing, I don't want that, so can any one suggest me the best way to do this?