While looking at some old projects developed with Cocos2D from the net, found that the new Xcode 4.2 throws the following error: "Illegal Configuration - Pattern colors on iOS versions prior to 3.0" and refused to compile.
Checked the net and found this page from Mark Tomlinson's site which says "The error is due to incompatibilities with older nib/xib files prior to version 3.0". It also mentioned about the fix is to "change the **Deployment** type in the *Interface Builder Document* settings", however the image no longer exist so I got no idea what he is talking about.
It took me a while and I finally found it. You have to select the nib/xib file, then at the right hand side, as shown below, under "Document Versioning" there's this drop down called "Deployment" and the current selected option is "iOS 2.0", just change it to the current version "iOS 5.0" (or anything above 3.0) then it works.