I am rooted on 1.2 and have installed dozens of app's from the amazon market and android market without many issues. A few won't install at all for some reason that I can't figure out.
Not sure if it will work with the rooted 1.2 as I am using Cyanogenmod, but the easiest way for me to install .apk's that I DL on my computer is to attach them to a Gmail and send them to myself. When I open the email on the nook I have the option to install the .apk from there. Gmail also acts as a storage if I need to re-install an .apk . Let us know if it worked for you.