Yes, if you purchase and activate Application Builder 8.5, it will work in LabVIEW 8.2.1. You will not be getting any LabVIEW 8.5 functionality since all the activation does is enables the Application Builder functionality in LabVIEW 8.2.1. Regarding your other question, you do not have to upgrade your LabVIEW installation as part of activating Application Builder.
George M
National Instruments