Ok couple of questions,
1) have you ran the Utorrent Setup Guide? thats probably the quickest and easiest way to make sure you have it right.
2) You say you have a 16Mb connection, which is MegaBITS. When you say you are seeing a 1.2Mb download rate, is that Mb or MB? Utorrent normally measures its download speed in MB (MegaBYTES) there are 8 bits to every byte.
3) what should your upload speed be? whats the max for your line (normally Upload is lower than Download)
4) is your connection "Up to 16Mb" or can you actually get 16Mb out of it?