Yep, the 7800 was backward compatible with the 2600. I played a lot of my 2600 games on the 7800 when I finally got one of those. Oddly enough, the 5200 got left out of this. It's not backward compatible and the 7800 can't play the 5200 games. That always struck me as strange.
I guess you could say backward compatibility is yet another aspect of gaming that Atari took the lead in.