It can, yes. But who's editing "CD quality stereo audio tracks" on an A1200 these days?
Up until 2008 I was editing music I had recorded in my home project studio using my A2000 and samplitude. I had a 32MB machine, while a three minute song in stereo is about 45MB so I had to use virtual RAM. While it was bearable, it was slow. I certainly would have LOVED 128MB.
I designed the artwork for the VIC-20 mega-cart that year too using PageStream and ImageFX on the Amiga. I was using large 300dpi images and multiple layers. I really pushed the 32MB ceiling on my machine - more RAM would have been good.
This year I did all the layout for the artwork of several children's books I wrote/illustrated. This was done using ImageFX under WinUAE (as my A2000 has departed). I was dealing with 8.5" x 11" images at 600dpi and I had to at times up the "emulated" RAM to 256MB. But good ol' ImageFX handled it!
So, yes, if I was still using a hardware classic Amiga - 128MB of RAM would definitely get used. For classic gaming, I don't think it's meaningful, but for productivity/creative work, it definitely comes in handy.