Don't worry so much about the water component of the KOH. It's really only the % by mass of KOH that you need to worry about.
If it helps, another way of expressing the amount of KOH you have is by saying that in every gram of your impure sample, you have 0.84 grams of KOH. If you know the mass required to make 1.2 L of 0.60 M KOH, then knowing how much of the impure stuff you need is just a simple conversion. For instance, if say I need 0.84 g of KOH to make up my solution, then I would need 1 g of the impure sample. If I need 1.68 g of KOH, I would use 2 g of the impure sample (1.68 / 0.84 = 2).
Your first step is, as studiot said, to work out the mass of KOH required to make your solution.