I have a digital copy of the game already updated to 1.1.2. If I buy a physical copy of the game, will it automatically be in 1.0 if it isn’t used? And will the game play from the version of the cartridge or the digital game if they are both in the switch at once?

From what I understand, you must factory reset your switch(you can just search up how to do it on Google), and then it will be back to 1.0 on physical. But, make sure either you do this on a switch that has nothing you care about on it, or you have Nintendo switch online, so you can save all your progress to the cloud for other games you have. But, long story short, you have to factory reset your switch, and then it will be 1.0.

Luckily I have switch online. So if I do that, I would have to backup everything, then factory reset, then sign in to switch account after the reset, and all of my progress will be there????

Unfortunately not all games will have their progress saved. Some games (mostly online games) will not have a cloud save. Games like Pokemon, Animal Crossing, Splatoon, and other games with online features are unable to be saved. If you value your progress in those games, it's best you don't factory reset your switch.

Luckily, I have a 256 GB micro sd card, and I can move all of that data to it.

Edit: I just finished moving everything I could from the System Memory to my sd card.