[Edit this] caveat; fixed or not?

I have 1.2 and “Edit this” does not appear next to entries and comments.
I really want the on-page “Edit this” links feature, but I also want to be able to keep my wordpress files in a seperate directory. Before 1.2 these two features were mutually exclusive, so I was thrilled when 1.2 proudly announced this as a key feature.

Directory flexbility: Now you can have all the WordPress files in one directory and the weblog in a higher level directory.

While this didn’t specifically address the caveat, it seems implied, otherwise would this be a new feature? But this discussion seems to clear up any ambiguity. Bard09 specifically asks about the “Edit this” caveat.
To which mark replies:

That issue is fixed in 1.2 mingus. The only issue is they still have it posted.</bloc kquote>
So I went for it.
Unfortunately for me–no dice. After following the instructions in the docs, here and in the wiki, I still get no “Edit this” links.
My main index.php is located at example.com/ and all the other wp files are in example.com/weblog/ , basically in an effort to better organize my root folder.
Under “Options > General”, I have set:
WordPress address (URI): http://example.com/weblog
Blog address (URI): http://example.com
Can anyone answer definitively whether or not wp 1.2 supports both “Edit this” links and “Directory Flexibility,” or am I just doing something wrong?
Thanks