Arduino and BlueSMiRF - Transmit Problems

I'm new to programming with the Arduino and am having trouble with communication over bluetooth.

I am able to send data from the computer across bluetooth to the Arduino but I am not receiving data from the board when I try to just send a typical message (byte or string). If I use an infinite while loop with only sending data (code below), I do receive correct data across the bluetooth on the computer. Also, both sets of code run as expected over the USB comm port.

I have the bluetooth module on port 0 and 1 and have the code set the baud to the default of the bluetooth module of 115.2k baud. The CTS and RTS of the bluetooth module are connected together. I have the computer set to 115.2k baud.

Does anyone have any suggestions on troubleshooting? Or has anyone successfully used this hardware together?

Currently, I do have the board's and the bluetooth's power coming through the Arduino's USB port. Would having the USB port connected cause this problem?

Hardware In Use: Arduino Duemilanove BlueSMiRF Gold - http://www.sparkfun.com/commerce/product_info.php?products_id=582

Software: I've tried using Hyperterminal and TeraTerm

Arduino While Loop that works:

void loop(){  
 while(true){
    Serial.print("H");
  }
}

Code running on the Arduino that is not working:

int ledPin = 13;
int val = 0;

void setup(){
  Serial.begin(115200);
  delay(500);
}

void loop(){
  
  while(Serial.available()>0){
      val=Serial.read();
      if(val=='H'){
        digitalWrite(ledPin,HIGH);
        Serial.print("High");
      }
      else if(val=='L'){
        digitalWrite(ledPin,LOW);
        Serial.print("Low");
      }
      else{
      }
  }
  
}