Q: why do my photos still use 1.2gb even though they are optimized and on iCloud photo library

Optimization only occurs if/when the space is needed for something else on the phone.

How many photos do you have on the phone? Is the 1.2GB approximately the same number as before you turned on Optimize iPhone Storage?

I have seen a couple of reports from people who say that they were able to trigger the optimization by turning off Settings > iCloud > iCloud Photo Library and then restarted the phone and then turned that setting back on.