Head Unit,
What I'm saying is that after using iTunes 7 to update the firmware to 1.2, it will not let you run a previous updater to go back to a previous version. At least it wouldn't let me.
As a workaround, I connected my iPod to my sister's PC, which is still running iTunes 6.0.5. I had a copy of the 6-28-2006 updater on a thumb drive, which I then ran on her machine to restore my iPod to that version (1.1.2) of the iPod firmware.
I used my user account login on her machine, and under my login, the iTunes library is completely empty. So I ended up with an empty iPod running firmware 1.1.2, which I then took home to my computer, docked it, and re-loaded all the music that is in my iTunes 7 library. It asked if I wanted to update my firmware, to which I said, "no thank you," and now I have an iPod running firmware 1.1.2, with all of my music, and iTunes 7.0 on my PC.
The result is that now my iPod works with my Honda Music Link again. When it did not (firmware 1.2), I saw the check mark and "OK to disconnect" message on the iPod while I had a flashing D-06 on my stereo. I could not tell if it was charging or not.