That is correct. You get both SM3.0 and SM2.0b support with DX9c. FarCry 1.2 did have some install problems with some system configurations and saved games, but for the most part, if you do a clean install of the game, you're usually fine. Of course, 1.2 did introduce some annoying in-game bugs as well with fixed weapons.
Anyway, you don't need to resort to typing in the console to take advantage of instancing and or SM2.0b (for x800 owners). Simply add this parameters in the shortcut properties.
This is what I'm using for my 9700pro/9800Pro:
E:\FARCRY~1\BIN32\FARCRY.EXE -devmode "r_geominstancing 1"
For my x800xt:
f:\FARCRY~1\BIN32\FARCRY.EXE -devmode "r_sm2bpath 1" "r_geominstancing 1"
"e_vegetation_sprites_distance_ratio 100" is optional, but if you want the added eye-candy, you can turn it on. It still eats up your performance a bit, but not as bad as it would without instancing.
The only other stipulation in addition to the FC 1.2 patch and DX9c is Cat 4.8 or above.
OH YEAH. Sometimes, I use "r_DisplayInfo 1" also so I can gauge my performance.