As a security/battery conservation measure, I shut off Bluetooth on my 12" iBook G4, turning it on only when using a Bluetooth mouse of syncing my Palm PDA. Occasionally, Bluetooth enters a state of limbo, where it doesn't appear to be either on or off. The status indicator shows it is off, yet the dialog buttons and menu selections are dimmed out. Not being adept at stopping and restarting individual services on OS X, the only way I have found so far is a reboot.
From "About this Mac"...
Apple Bluetooth Software Version: 1.7.0f18
Software Update indicates that I am up to date as far as OS X is concerned.