RPE 1.2 has introduced many new capabilities, some of them requiring template constructs that were not available in previous versions of RPE. Running a template that uses such constructs in an older RPE version would produce very different results.
The differences would range from crashed reports to subtle differences in the output ( such as missing data) that could be difficult to spot. In order to avoid these problems we have introduced a new template version, version 2, that cannot be read by older RPE and RRDG versions. When a version 2 template is fed to an older RRDG/RPE it will be rejected as “unsupported” version.
At this time there is no Rational product, other than RPE 1.2, that can use version 2 templates. When using Document Studio 1.2 to design reports for tools such DOORS, CLM, Rhapsody etc and plan to run them from within those tool you must select template version 1.
When Document Studio 1.2 opens a version 1 document template it will ask if the template should be upgraded to version 2. You should upgrade your template only if you will use it with RPE 1.2. If you need to use that template with any other product embedding RRDG 220.127.116.11 or older you must select to keep the original version.
NOTE upgrading a template cannot be undone. You should always backup your templates before upgrading them even if you do not expect to use them with older RPE/RRDG versions.
Additional information is available here Version compatibility