If you've got the space, I'd use a butt-weld reducer, eccentric or concentric, depending on flow direction, with weld neck flanges welded on. Remember that a sudden change in piping diameter can have a significant impact on hydraulics. As a rule, I wouldn't use a reducing flange on anything larger than 1-1/2" on the reduced end.
Also be very careful if you're going to try drilling a blind like paddymac suggested, if this is going into code pressure piping. It is permissable by code, however only certain combinations are possible with a standard blind. If memory serves, the largest reduction you can make by drilling a NPS 12 blind flange is NPS 4. Larger than that, you have to use a hub blind to ensure there's enough material left on the blind to meet the pressure rating.
Note, this is a code issue, addressed in ANSI B16.5, which you should confirm what you're doing with - they've actually got a nice little table setting out the available reductions, but you have to start with a proper (normal or hub, depending on reduction) blind. You drill a hole in a blind flange that doesn't meet that code, and without calculations to back it you could be on your way to court.
