The problem is caused by the fact that the LaserJet 1200 is not fully supported on Windows 7, there are fewer drivers and utilities available for it on Windows 7 (from HP) compared to the full software package which is available for XP (and on the HP CD).
As for printing quality, look in the driver settings or preferences. It may be set to "draft quality" or something similar.
If you can't fix the quality issue, you really need a newer printer which has full Windows 7 support on the CD.
I don't rate HP printers much for quality output anyway. Consider buying a Canon printer, that's my preferred brand.