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.