I have an idea for a mod that fully changes the game (like Terrafirmacraft). The mod will require me to edit a lot of base classes so it will be incompatible with most mods, including Optifine (like Better Than Wolves). That being said, I was thinking of developing it in 1.2.5 and keeping it there (like The Legend of Notch) because:
1. I don't want to update my mod every time there's a Minecraft update
2. Overall, performance was better in 1.2.5 (at least rendering was)
My question now is, is it typical for me to develop my mod in 1.2.5 and keep it in that version?
This is probably not a good idea. Developing for 1.2.5 is akin to saying that you want to develop a game that runs only on DOS. Nobody really uses 1.2.5 anymore (I do very rarely). However, I do understand both of those reasons.
If you do go ahead and do it, I guess I'll pull my fresh jar backup of 1.2.5 and give it a try.