One more thing: Could you please check that it is in fact Torbutton 1.2.0 and not a Release Candidate you have? You can check by right clicking on the Torbutton and choose About Torbutton. (RC6 was on addons.mozilla.org) I wasn't able to reproduce the "green but not connected" error with 1.2.0, even if I have seen it before.
One more thing: Could you please check that it is in fact Torbutton 1.2.0 and not a Release Candidate you have? You can check by right clicking on the Torbutton and choose About Torbutton. (RC6 was on addons.mozilla.org) I wasn't able to reproduce the "green but not connected" error with 1.2.0, even if I have seen it before.