A good summary of what's new in Microsoft CRM 1.2 can be found here.
Additionally, the CRM Outlook client is now written in managed code - C# (rather than JScript in 1.0) and is accordingly much faster.
S.B. Chatterjee mentions in his weblog that Crystal Reports (now v9) is included rather than SQL Server 2K Reporting Services. Probably not suprising given that the latter is still in beta. However, sources have said that the latter will be included in CRM 2.0.
Update: see this eWeek article for CRM 2.0 information