Installing the official Froyo for Nook Color on a rooted device
I believe that the official 1.2 update will only install on top of an official firmware (1.0, 1.0.1, 1.1.0,) and only with the stock recovery, not ClockworkMod.

You will need to revert your Nook Color to one of these "stock" firmware versions before trying to upgrade to 1.2.  Alternatively, there are a few Clockwork Recovery-friendly versions of the 1.2 upgrade that will not require going back to stock first.