Upgraded my phone from 1.6 to 2.2 Android version, if I restore "Factory Settings", which version it will be?
Factory Reset doesn't take your device back to factory condition. It just clears all data, settings, etc.

So your phone will not go back to older Android version. It will be on the upgraded Android version (or any ROM that you have installed) with all data cleared! 

Watch this video for more help. At 5:30 the guy answers exactly what you are asking.