The resistance between the 1.2V rail and GND is 40 Ohms, is it safe?
When I've heard about power supply "isolation testing" before, the context has been a test done on the mains inputs to a system or device. I've also heard these tests called "insulation resistance" tests or "hipot" tests, though those could be slightly different tests. The test confirms that voltage applied to the mains input won't connect to the case of the UUT and cause a shock hazard. 

The test involves applying a fairly high voltage (1 to 5 kV or so) to verify there's no spark gaps or insulation breakdown paths between the mains and user-accessible surfaces. 

According to this, isolation testing tests


  The maximimum voltage (ac or dc) that can be continuously applied from the input to output or input to case of an isolated power supply. ... Testing power supply isolation requires specialized equipment (Hipot tester) and can be destructive.


The main point is that this is a test you would do on the mains input of an isolated power supply. It is not a test you should be doing on the inputs where your operating circuit expects to receive its local regulated input power.