No, if you choose to convert a PC card to the Newton 2.0 OS, then you will not be able to read it on a Newton PDA using 1.x of the Newton OS without reformatting the PC card using 1.x of the Newton OS.
If you need to use data on a MessagePad with 2.0 installed, you should select Read Only when the message appears. Selecting Read Only sets a soft write protect on the card, which prevents you from writing to the PC card.