I have an existing system with ~1200 packages installed. I've been asked to review and remove any unnecessary ones. Is there a way to tell which packages are not being used? (and do not have tenacles to other used packages?)

IF this is the wrong forum please let me know and I will correct it. Thx.

what OS/flavor/architecture?

Centos 6/ 64 bit

What is your system doing or what should it be doing?
You could try to set up another system to do everything your system needs to do, but based on a minimalized approach. This could be done even on a virtual machine if your system was a powerful production system. Once you set up your toy system you can compare the installed packages between both and remove any unwanted from the main system.

Another approach would be to go trough the list of all installed packages, find and line up all dependencies and deinstall any unneeded software.

Cleaning up a "grown" system with "history" is always an unthankful task, doesn't matter if it is physical (network) cabling or software system.

You can list the installed packages via the following command:
rpm -qa

Any other software installed using source packages will not be listed. There is no way for us to know how the server is being used to say what applications / services are not required. I believe the basic server install has around 600 packages.

Use rpmreaper. Not sure it is in distribution, but you can find it on net.
Almost sure, you can delete any -devel- packages, almost all .i386 packages
Then remove all packages, that you do not know what they do.

Rpmreaper follow dependecies and will not allow you to remove required packages.

BACKUP BEFORE ANY CHANGES !!!!!