The 1200x1200 dpi image will look larger, but the interpolation will make it slightly blurred. No, of course not. There is no added detail present from the original photograph. It's just a larger image, which simply repeats existing data, and at best it's a mix of real and faked data. You can blow it up in your photo editor later, same thing.
Interpolated images have a vague unsharp look.
The pixels are smaller, and the jaggies on the line edges are much reduced. Line art is a special case . For Color or Gray Scale modes, no, these interpolated resolutions are NOT generally useful at all, the results are too poor. That's the wrong way to look at it, it's not the general purpose. Stepping motors are used because of their unique characteristics.