"Turn on Bluetooth" does nothing and all settings are disabled

gnome-bluetooth 2.28.1-0ubuntu2, Ubuntu 9.10
gnome-bluetooth 2.91.2.is.2.32.0-0ubuntu3, Ubuntu 11.04

When plugging in my bluetooh adapter the bluetooth icon appears. If I click on it says that bluetooth is enabled.

Now if I click preferences I get a window saying that bluetooth is disabled and a big button to enable it (screenshot 1).
Clicking the button has the only effect to gray it out (screenshot 2).

If I disable bluetooth using the context menu and then enable it again using either the preference window (which needs to be reopened), then I'm able to see the controls in the preference window (needs to be reopened again to see the change).

All of them are grayed out and not usable except the "show icon" checkbox (screenshot 3).

Output of hciconfig hci0 when bluetooth is active either for the 1st time of after enabling it (according to the context menu):

hci0: Type: USB
 BD Address: 00:10:60:A9:9A:C6 ACL MTU: 192:8 SCO MTU: 64:8
 UP RUNNING PSCAN
 RX bytes:687 acl:0 sco:0 events:23 errors:0
 TX bytes:92 acl:0 sco:0 commands:23 errors:0

Output after disabling:

hci0: Type: USB
 BD Address: 00:10:60:A9:9A:C6 ACL MTU: 192:8 SCO MTU: 64:8
 DOWN
 RX bytes:693 acl:0 sco:0 events:24 errors:0
 TX bytes:95 acl:0 sco:0 commands:24 errors:0

Release: Ubuntu 9.10 (with all the updates)
gnome-bluetooth version: 2.28.1-0ubuntu2
Adapter info (lsusb):
Bus 002 Device 009: ID 0a12:0001 Cambridge Silicon Radio, Ltd Bluetooth Dongle (HCI mode), it worked fine with jaunty.

Screenshoots attached.
Let me know if there is any other information I can provide.