I just had the same problem on a fairly new installation of Ubuntu 10.04
Lucid on a Dell Latitude E6500.
I'm not sure that "two reboots" is an acceptable workaround for the
general public.
** Changed in: bluez (Ubuntu)
Status: Invalid => Confirmed
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Bluetooth is disabled. Pressing "Turn on bluetooth" not working
https://bugs.launchpad.net/bugs/554431
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