Are you guys sure that Inspection 1 includes valve adjustments? I was pretty sure it was only in Inspection 2 which is roughly 25K-30K miles?
Edit: It looks like I was mistaken
Anyway, OP, I believe a $1200 Inspection 2 charge would include valve adjustment. They need to measure the clearances anyway so it's not like there's much more labor involved to change out the shims if necessary. Back when I called a dealership for a quote on Inspection 2, they gave me a figure just a little over $1200 and told me that it includes valve adjustment.