Android N requires the IDE to be running with Java 1.8 or later?

I got the same error you describe but on OS X. I know this may not solve your problem (because I don't know the equivalent for Windows), but since this is not OS specific I am leaving the solution for any OS X fellow out there. Edit the file /Applications/Android\ Studio.app/Contents/Info.plist, and remove the 1.6 version (in my case), you may place 1.6+, 1.7+ or 1.8, whichever you prefer. Mine ended up like this

...
<key>JVMVersion</key>
<string>1.7+</string>
...

Be aware there's an incompatibility with drag and drop with java versions 1.8_60 to 1.8_75 (IDEA-146691) which the IDE will report once you successfully change the version.

For non Terminal Users

1. Find your Android Studio.app file. If it's in the dock you can right click it and choose Options > Show in Finder.
2. Right click it and choose Show package content.
3. Navigate to the mentioned file (Contents/Info.plist).
4. Edit the file with your favorite text editor.

Click on the letter N, next to the android icon in the Preview window and select API level 23 or lower. That should solve it.

Set JDK_HOME and JAVA_HOME environment variables, in my case C:\Program Files\Java\jdk1.8.0_60.

Check Java version in Help > About. It should show the JRE version you just set.

That is it, now you can preview your layout in N.