That's an issue with Apple and the App Store, actually. The same thing was happening to me last night. I was being told that 1.3 was available but it was still downloading 1.2.1
This morning I fired up the App Store on my iPhone and it again told me I needed to update to 1.3 and this time it finally did download 1.3 to my iPhone.
I've experienced similar issues with other application updates during the past few weeks, so it looks like it's some sort of new glitch in the App Store as a whole.
I would recommend you try to keep attempting to update every half-hour or so until 1.3 filters through the App Store and finally does download. You can tell you have 1.3 by checking the version number listed at the bottom of the iCam Options screen. It's been approved and "Ready For Sale" for about 8 hours now, so hopefully this won't be an issue for much longer.
