Does this mean also mean we won't be able to target back to iOS 5?
iOS5 is done. The last update was 16 months ago. For all intents and purposes it's already deprecated.
iOS6 will take a while longer to reach the same sad end. My guess is around 2 years - because of higher number of iOS6 devices out there.
I can't see the recompilation of 32bit app into 64bit app going smoothly. Software companies always brag about smooth transitions. In reality there are complex issues that need to be solved. Chances are people will just stop developing 32bit apps once iOS7 hits critical mass.