Something that was mentioned in another thread is to set session.autostart to 1 in your php.ini file.
I moved a 1.2.11 installation from one server to another and ran into this exact problem.
I could see sessions being created so it wasn't a problem with permissions. Cookies were not being blocked. Finally I noticed this session.auto_start parameter was different in the php.ini files. It looks like the default value for that parameter in PHP 5.2.9 is no longer set to 1.
Anyway, after a whole day of debugging it works!