Setting I/O voltage on an embedded linux board
You don't give details about the board, but my assumption is that certain peripherals (Flash or SDRAM) on it will require 3.3V (or, less likely, 1.8V) and that the I/O voltage is therefore fixed at that level.  

The "Embedded Artists" site says that after purchase of a board the schematics can be downloaded. Doesn't the power section give you an answer?

edit
If you want to connect a 1.8V sensor it's better to run the sensor at 1.8V and use a level shifter between the sensor and the microcontroller if it has a digital output. Changing all I/O voltage may cause your memory not to work anymore. The sensor probably has a serial interface, requiring limited hardware for the interface. For a single line the Fairchild FXLP34 may be suitable.  



This document describes how to interface between different supply voltages. It's written for interfacing between 3V and 5V, but a number of principles can also be used for other voltages.