The main thing to bear in mind is that a few platforms dont support the later versions of Java. This will mean excluding those users from deploying FOP on their production servers and mainframes.
Well. Java 1.4 has some added goodies, in particular nestable exceptions which will make problem tracking much easier, the BIDI support, other AWT fixes and extensions and JCE by default (people will still have to get a RC4 provider though :-/).
I did a quick search of the archives and found the thread that decrees 1.1 will no longer be supported and the minimum JDK is 1.2.
Acutually I doubt FOP 0.20.5 will run completely in an 1.2 environment. The binary is compiled with 1.4.1, and I vaguely remember compiling problems already for 0.20.4 on 1.2.