It is always recommended to start a new game when you install a new patch.
However it is sometimes possible to continue a save game with a new patch and have the new features/corrections work for you.
To install the patch 1.2 I would first uninstall HOI2 following these instructions.
http://forum.paradoxplaza.com/forum/showthread.php?t=181594
Then do fresh instal from CD to default Drive and folder.
Then just apply the 1.2 patch.
EDIT: jpd types faster than me.
However it is sometimes possible to continue a save game with a new patch and have the new features/corrections work for you.
To install the patch 1.2 I would first uninstall HOI2 following these instructions.
http://forum.paradoxplaza.com/forum/showthread.php?t=181594
Then do fresh instal from CD to default Drive and folder.
Then just apply the 1.2 patch.
EDIT: jpd types faster than me.