I think $1200 is reaching, but mainly because of the condition of some of the components or their hardware. Cleaned up? Could fetch a grand - but it is on the small size, so...you never know.
OP: In the interests of full disclosure (of what I can tell about your bike from the photos), I'd say the frame/fork is from around 1980-81 based on the foil "chrome" chainstay decal. Those didn't stay around long as the treatment was deemed cheap; that feedback got back to Colnago. Frame/fork is likely built for recessed brake fittings; the current setup is a compromise, and never having tried such a setup I can't give feedback on how well it might work. The Cinelli XA stem looks to be mated to a Cinelli Giro d'Italia bar, and the brake levers are later Record or Athena/Veloce. The pedals are pretty much paperweights today
However! The frame really is in fantastic shape. The bits of surface rust will come off easily (lots of rust-removal threads here on the Forum); I myself cleaned up worse than what currently graces your fork crown from a Bianchi I bought last summer. The overall paint looks great and seems to need only spot cleaning, a bit of rust-removal and a polish. The decals - except the for the easy-to-replace Columbus decal - also look to be in fine shape. The paint and decals are obviously original. The remaining parts just need some polishing and rust-removal. How worn is the sidewall of that rear rim? Hard to tell from the photos, but to me that's the worst of the wear, and it may well be more cosmetic than anything else.
You can turn it into something special without too much effort or expenditure.
DD