The answers to your questions depend on which partition(s) you run B&N1.2 from, and which partition you run cm7 from.
I have cm7 on the primary partition. When the NC boots w/o any user interaction, it boots into cm7, although I rarely power up the NC because I just keep it booted/suspended on cm7. I only boot into b&n (holding down the N button while powering up the NC) when my 4 yr old want me to read some of the Nook books to her or if I go to a B&N store and wanted the instore access (although that doesnt' work with my rooted 1.2 version - I might try and "unroot" it).
If/when b&n updates their software again, you will need to wait for a cwm version, and actually you would need to wait for a dual boot version. But the updated won't install automatically. I guess if you were booted into B&N on the 2nd partition, and it tried to download and install the update, it might crash the NC because it would try and install to the 1st partition, which under cm7 looks dramatically different.
BUT, the benefits of having cm7 on the primary partition for me is that it gets updated MUCH more frequently, I don't have to wait for a dual boot version, I can just flash it. Same with cm7 kernels etc. Since I use cm7 99% of the time, I chose to have it on the primary partition.
When a future b&n upgrade comes out, I will just make sure that I'm booted into cm7 until there is a compatible dual boot. Or I can do a manual update w/o needed to wait for compatible dual boot by following these steps:
1 - from cwr, do a nandroid backup - this will backup my primary partition which is cm7.
2 - revert the NC to stock using the stock flashing methods.
3 - update the stock system using B&N update
4 - jump through the steps to create dual boot and move the b&n updated version to the 2nd partition
5 - restore my nandroid cm7 ...
The one downside to this is that I lose any customizations on the stock version - but that isn't a concern for me. In fact I think I might do these steps to try and have "stock" b&n 1.2 on my second partition (rather than rooted) so that I have "in store" access again.