In short, a higher clock speed can require more electricity. More power = More Powerful = Faster
Lower voltages can cause instability at higher speeds, but can be used at lower speeds (such as at idle), resulting in a pretty aggressive power savings when the phone isn't taxed or idle.
Every processor has different tolerances to non-standard voltages and clock speeds. Your mileage may vary, just because my Epic is stable at 1.5ghz (sadly it really isn't...), doesn't mean that yours will be.
Increasing power will also increase heat, which can decrease the lifespan of your phone. Take it one step at a time, use the phone for a day or so, than step it up a little more until you eventually find the highest level (hanging, locking, odd behavior), than dial it down a couple from there. In my humble opinion a 1.2ghz clock speed at standard voltage is more than enough to give the phone some oomph.
For the undervolting at lower frequencies, same thing, do it a bit at a time, and dial it up a bit if you get to a point that it won't wake up, or locks up at idle or non-processor intensive tasks.