The difference is that version 1.2 filters for good loot from ruined portals and I think shipwrecks not sure though.

You can use whichever you prefer

You can use any but 1.2 with power loot is the best

you can use both but 1.2 has extra good stuff, like a ruined portal with village or shipwreck at spawn, 1.2 is the best, but you can go with 1.1 if you want too..