Other than Flash, the way it stands right now, I don't see a whole lot of reasons to go 1.2. If you're getting by without flash right now, you obviously must not need it all that bad, so if I were you I would not use that in my determination to move to 1.2.
I recently went to rooted 1.2 from rooted 1.01 and I'm not all that happy about it. My video playback has suffered...not only do the videos not work as well, I'd say the quality of those videos actually looks worse too. Not sure why/how, but it does. I enjoyed putting a movie on my Nook when I was traveling or just tinkering with it. As mentioned above, the Market is very funky right now....pretty annoying. Apps like Redbox aren't functioning properly for me either. On rooted 1.01, it picked up my location based on WiFi....for some reason, that's not working on rooted 1.2. I'm sure it'll all get ironed out, but as of right now, I wish I had stayed on where I was.
I would go to CM7 except for my kid loves the read to me books which I can't use on CM7.