#1 It's bad practice to have interfaces, on the same L2 medium, with different MTUs. In the situation you describe, logically an interface with a MTU of 1200 should not accept or transmit a frame received using a MTU of 1500, and further, if purely L2, packets won't be fragmented (as they are not "visible" to a L2 interface).
In real world, as explained to me once by a Cisco SE, likely your Cisco router interface configured for an MTU of 1200, assuming Ethernet, may accept a MTU frame of 1500, because the interface NIC really can accept such. (Again, logically, it should drop the frame as being too large.) Conversely, though, since the interface is configured to only send frames no larger than 1200, it shouldn't transmit a 1500 byte frame (i.e. no transmission logically or physically.)
#2 as mentioned by another poster, for a MTU of 1500, that's the frame's maximum payload data, in the sense of amount of data we can send, per frame (i.e. layers above L2). As also mentioned, when we talk of frames of sizes like 1514 bytes, that's including L2 overhead, like MACs and FCS, which varies on different medium. Further, on Ethernet, there's more L1 overhead, another 20 bytes on the wire (some of which is time delay gaps, which consumes bandwidth, but is not data in the sense it caries information).
You might look at Wiki Ethernet Frame.
BTW, what MTU represents is the maximum amount of "our" data we can place into a L2 container, i.e. our L3 and higher data. For example, an IP packet usually uses 20 bytes of the 1500. TCP usually uses another 20 bytes, so typically, we can send up to 1460 bytes of data within a 1500 byte MTU when using TCP.
