As most others have said here, the best upgrades for an A1200 to get the most out of it are:
- Blizzard 1230 MKIV 50MHz 68030 Accelerator with 32MB Ram.
- Buffered IDE interface (can get one for £10 from Amigakit).
- Internal 2.5" Laptop HDD (larger drives possible using SFS filesystem (I'm running 40GB HDD). Or an IDE to CF card adapter and CF card.
- Internal slimline Laptop CD/DVD drive, using IDEFix'97 software.
- Upgraded PSU. The standard A1200 PSU won't give enough power with an accelerator installed on most A1200's. So you could try using a 60W A500 PSU, or if that fails convert a PC PSU to work, or track down a Goliath PSU.
- Optional - Internal scan doubler/flicker fixer - Allows you to run all Amiga screenmodes on a VGA PC monitor, even games.
- Optional - Amiga to Scart cable - Allows much better quality TV resolution Amiga modes on a TV compared to RT or composite.
- Optional - PCMCIA 16bit Network card to use broadband connection.
- Optional - PCMCIA Wireless Network Card. Same as above.
With that setup it transforms a standard A1200 into a very nice Amiga. Install Bloodwych's ClassicWB preconfigured Workbench setup, along with KillerGorilla's WHDLoad Game and Demo packs and you have a setup with all the great games ready to run directly from the HDD. No disk swapping or loading. Just click and play each. Perfect setup to enjoy the best the Amiga has to offer.
Going any higher than an 030 accelerator and you are leaving the realms of sensible upgrading of an A1200 just to enjoy using the system. Opting for an 040 or 060 accelerator starts to get expensive and it more an enthusiasts rute where they are no longer upgrading to make the system good. Instead it becomes an ossession in making the Amiga do as much as possible. There are loads of higher upgrades and customisation possible. 040, 060 or PPC accelerators. Tower case conversions, which then pen up the ability to install a PCI breakout board and then PCI graphics cards, sound cards, network cards etc... but personally I don't see such upgrades as really worthwhile these days. A Blizzard 030 with some fast ram is more than enough to run most Amiga software and enjoy the Amiga.
As for OS3.9. It will happily run on an 030 Amiga. I've been running it on my Blizzard 1230 MK4 based A1200 for some time, and it runs on my 040 A4000 fine too. But 3.9 is really only worth bothering with if you are looking to use your Amiga for more than classic stuff like gaming and demo watching. If you want to use the Amiga as a main system then use 3.9, but to get the most from it higher up upgrades like tower conversions and PCI graphics cards will benefit.
You can spend form a few pounds, to many hundreds on the Amiga as a hobby. It all depends if you are looking to push the system as far as you can, making it as powerful and as expanded as you can, or if you just want to build a nice setup to enjoy playing around with.