Part of our current application under development is being put into production now, but we hope to use Django 1.2 final. Our strategy is to write code, test and deploy using Django 1.1.1, but also test using virtualenv. There's really no reason not to test your code under 1.2 whatever your deployment decision because you'll want it eventually to be compatible with 1.2.
virtualenv makes the whole process painless and is the key to quickly switching between environments. It's incredibly easy to set up:
easy_install virtualenv
virtualenv django12
cd django12
source bin/activate
Then download and install Django 1.2 in the virtual environment and run your tests. I run the development server in virtualenv on port 8081, so I can have both servers -- using the same application code -- running at the same time, ports 8080, 8081.
In our case we had to remove one import and wrap a few others with try/except conditions. I had to write a dummy csrf_token
template tag for CSRF to work -- the Django developers have informed me they'll include a dummy tag in 1.2 final. We also upgraded the South migrations tool to 0.7-pre, as the current release doesn't support Django 1.2.
Bottom line: Regardless of your deployment decision, a case can be made for testing both versions of Django if at all possible.