Well, the body will run you about $750...assuming you're buying it new. That leaves $450 for a lens, which puts you in middle to lower-end range of available lenses. You will also need a memory card, so don't forget about that expense. How about an extra battery? Maybe a camera bag and/or tripod? If you get the D90 w/ 18-105mm kit lens, it's about $980, still leaving you with around $200 to play with...and you'll already have a decent all-purpose lens.
Just my 2 cents here, but everyone always buys some extra gear to go with their new camera. So if your budget is $1200, it may make more sense to get the D90 kit and save up for a better lens down the road.