What I meant (in English
1. Install Titanium Backup.
Open Market, tap the search icon at the top, search for Titanium Backup Pro and install it. No need to do anything with it yet tho. If you buy it, it'll be much easier to restore your apps, otherwise, you'll get a prompt for every one of those apps and you'll have to choose "install", "ok" and "close" (or something like that). I bought it a long time ago. If you buy it, you have to install the free version first, then you can buy it from Market again.
2. Backup CM7.
Open Rom Manager and choose "backup your current rom" (CM7), so we can return to what you have now. It'll boot into recovery, take about 5 minutes and return to CM7.
3. Restore your Rooted 1.2 backup.
Then, restore your rooted rom (tap "manage and restore backups" in Rom Manager). I think you'd have two backups there (one from today and the you made last week after rooting). Tap the oldest one
and choose "restore". Again it'll boot into recovery and take about 5 minutes, then boot into your rooted B&N software.
4. Update apps in market.
When you're running your original rooted rom, you'd have to go to Market and search for Titanium Backup and install the free version. If you purchased it, you can press the menu button and choose "my apps" and it should show your Titanium Backup Pro there. Tap the menu button and update all your apps while you're here. We don't want to take the 1.3 update while here so get in update it, back it up and get out.
5. Backup your apps with Titanium.
Then using Titanium Backup, you'd have to make a backup of the apps you had installed. (menu button, choose "batch", then choose "backup all user apps". Then tap "run the batch".) The status bar will show when it's done.
6. Return to CM7.
When that finishes, go into Rom Manager, tap "manage and restore backups", tap your most recent backup (CM7) and choose "restore" (again about 5 minutes in recovery).
7. Restore your backed up apps with Titanium.
Then from CM7, open Titanium Backup, choose menu button, choose "batch", find "restore missing apps with data". Then tap "run the batch". If you didn't purchase it, you'll have to do a lot of clicking to install all your apps... probably about 3 times for every app you backed up.