I have updated the server to mc 1.2.3. However given that this is completely new code written by bukkit, not all plugins have been updated. Some may not even work right. The list of plugins currently disabled is:
BioMed (Plugin that let me control biomes. Terraferma, Kipuka, and Chystrel will be snowy until further notice)
Also there is a display bug (Client side only) when generating new chunks. It makes things look stripey and weird. Relogging fixes the display bug.
Things may be buggy! Let me know about issues ASAP.