Well I absolutely agree that he should use a 0% error baud rate if he can. And he can use this web page to help him pick one:
http://www.wormfood.net/avrbaudcalc.php?postbitrate=1200&postclock=1&bit_rate_table=on
But a 10% error I think, if I recall correctly and maybe I don't, is well outside Atmel's spec. I thought that spec was well under 5%. I suppose I should go check the data sheet now...
And BTW, I didn't mean to imply anything by asking why you seemed to suggest he not use a crystal. I was just curious. I don't know what his power budget is of course.