Our friend Cesar Menendez from the Zune Insider has posted that the Zune Team will be releasing updated PC software and device firmware today at 10am PDT. You can grab the updated software from Zune.net at that point. Once you have the new software installed, you should be able to update the firmware on your Zune to version 1.2.
Originally, the Zune Team planned to make this Windows Vista-compatible software available around the same time Windows Vista would be available to the general public (i.e., 30 Jan). It looks like they were able to beat the clock, and just in time for the holidays :)