

Once it's started, go to the 'Utilities' menu and select 'HCI Controller Selector'. Simply start up the app, located in /Developer/Applications/Utilities/Bluetooth/, and it will give you a message about turning on the controller - ignore this, as it doesn't seem to help. I'm sure a restart would fix, but I've found that if you have the Developer Utilities installed, Bluetooth Explorer.app will do the trick. I usually try turning off Bluetooth when it has issues, but in this state it will refuse to turn back on (the menu bar option for 'Turn Bluetooth On' is greyed out).

When in this broken Bluetooth state, trying to connect to any Bluetooth device will cause an error. Turning bluetooth off means you can't re-enable, but with Bluetooth Explorer, you can force it to do so. Occasionally the bluetooth process can decide it doesn't want to connect to any devices.
