1.2 HDMI source and 1.3 receiver...

are they compatible?
Yes, you'll be fine.
what about the other way around?
Yes, but note that you won't be able to take advantage of any HDMI 1.3 features of the source (e.g., DTS HD MA streaming, etc.)
What's the best that I can hope for with the 1.2/1.3 configuration?
Best in terms of what?