Is it ok to install second rubber rim tape over the existing one to flatten out the "hills". The tyres are mtb 12" and the air pressure will be around 60psi-65psi, and the load around 220lbs.
I can see absolutely no harm in any reasonable number of rim tapes. The only downside is cost: you have to pay for two rim tapes. If you start to stack a huge number of rim tapes, let's say over 5, then you'll probably note that the rim tapes cover the rim channel, making tire installation harder than it normally would be.
So try it to see how easy tire installation is. Once the tire has been installed, your only potential problem is tackled.
Or is it ok to leave the "hills" forming inside the rim with one rim tape?
Most likely it's as ok as a single wall rim can ever be. In particular, your wheel is never as strong as it would be with a double wall rim. However, if you really want to use a single wall rim, that's one solution. Note the "hills" don't move much in operation (spoke tension in a rotating wheel is dynamic but the spoke ends shouldn't move because spoke tension changes due to slightly flattening wheel) so they are unlikely to cause a puncture over time. So, it you install an inner tube, if it doesn't puncture in a week of riding it's unlikely to puncture in several years of riding, apart from other external causes of puncture.
To be completely sure, install an inner tube, take it for a ride or two, and deflate the wheel removing the inner tube. Do you see any inner tube damage at the spoke ends?
