I see nothing that would compel me to go for 1.2.0, and indeed there seem to be many reasons (reliability) to stay away from it.
I'm completely satisfied with 1.1.4 and will stay with it.
I took the precaution to load my entire music collection into the 1.1.4 touch so I won't need to connect the touch to iTunes in the foreseeable future. If I want more tunes I'll connect with my Nano.