I understand that the Bluegigga WT12 requires RS232 when using UART which is what I'm planning to do and thus it requires high voltages? Would that make it unsuitable for a battery powered application? If not what alternative Bluetooth module could I use that supports SPP and has a robust API like iWrap?
One would first have to ask "how big is your battery? (Capacity)". However, use of RS232, which does use higher voltage than logic circuits, does not preclude battery operation.
These devices use chips such as the MAX232, which generates RS232 voltages levels from 5V using charge pumps.
Edit: I think I see why you're confused. The datasheet includes the following:
WT12 Universal Asynchronous Receiver Transmitter (UART) interface provides a simple mechanism for communicating with other serial devices using the RS232 standard. The UART interface of WT12 uses voltage levels of 0 to Vdd and thus external transceiver IC is required to meet the voltage level specifications of UART.
This really badly worded, in my opinion. The WT12 does not use RS232 levels. It instead uses logic levels. What it is trying to say is that to connect to an external PC using RS232, it requires an external transceiver, such as the MAX232. Its UART pins can be connected directly to the UART pins of almost any microcontroller which uses the same I/O voltages: if you're powering the WT12 Vcc on 3.3 volts, use a microcontroller also with 3.3 volt Vcc (or Vio if that can be set separately).