Bluetooth will not discover devices

You may be thinking this is a hardware issue, but as you'll read below, I believe it to be a Windows 7 issue.

I upgraded my Dell Dimension 4600 to Windows 7 (clean install on new hard drive). At first everything worked perfectly. At some point, there was an update installed that included an updated Bluetooth Driver. Now, everything works except for my Windows Keyboard and Mouse Elite for Bluetooth. Windows Compatibility Center says it should work with default drivers but it doesn't. I tried rolling back the driver but that wasn't an option so I have uninstalled the device and driver and installed without internet connection so it would only install the native driver (verified by date and version). It still will not work. I have searched many forums including this one, probably tried 12 to 15 different proposed solutions and nothing seems to work. Device Manager says it is installed and working properly but when I go to Add a Device, it does not find anything (phone, mouse, keyboard) even though I have made sure they are discoverable, have working batteries, etc.

So, I went out and bought a new IOGear GBU421 Bluetooth 2.1 USB Micro Adapter that specifically says it is Windows 7 compatible. Per the instructions, I ran the Setup from the CD it came with and plugged in the adapter at the time the setup told me to. It installed all of the drivers and said I was ready to go. After a restart, I went to Add a Device and just like before it will not discover my mouse, keyboard or phone. I went to the IOGear website and downloaded and installed the updated driver with the same results. Still not working. I called IOGear and they stepped me through a few things and still not working. At their suggestion, I took the dongle to another computer that is also running Windows 7. At their suggestion, I just plugged it in and let Windows automatically install the drivers. After a restart I went to Add a Device and it worked perfectly on the other computer. So, their suggestion is to go back to my Dell, un-install what I installed from the CD and from the online update, remove the device via device manager and have it also remove the drivers, restart and plug in the dongle and let Windows find and install the drivers just as it did on my other computer. After doing all of that, it still will not work on the Dell.

So, I am thinking problem with my Dell. So, I boot to Ubuntu via CD and let it install it's native drivers. Bluetooth works perfectly with Ubuntu on my Dell. So, my reasoning and process of elimination, this has to be some setting with Windows 7. Perhaps there is something I did not remove? Perhaps there is a hardware conflict even though nothing shows up in Device Manager?

Does anyone have a thought on this?

Which windows 7 64 or 32. It might be a driver issue.

It is Windows 7 32-bit.

In your Device Manager, under Bluetooth Radios, you should have an entry called CSR Bluetooth Radio. Right-click on it and select Update Driver Software. Then select "Browse my computer for software..." In the next screen, select "Let me pick from the list of drivers..." You should have a few options available; choose Generic Bluetooth Radio.