Thanks to you again for looking. Let me see if I can explain myself:
My bluetooth problems with the COM ports and whatnot seemed to get all goofed up with the inclusion of that bluetooth dongle on the Windows machine. It creates extra ports, and they are all busy, and I can't bring any program to connect with them (arduino port monitor says already in use, teraterm says can't connect. )
So I first verified the sketch:
If I load the sketch with Windows 7, when using the USB cable, I receive and send through arduino port monitor (either on my Windows or on Mac) with no problems (since it is monitoring the port created by the cable).
Then I unplug and connect the bluetooth and plug into alternate power for a wireless setup.
I am unable to establish connection with the Windows machine for whatever reason the dongle doesn't like me, but with my Macbook, the bluetooth will connect and communicate (but only one way). The arduino port monitor can see the messages being sent to it, but I can't send a message to it. For instance, if I run the program you mentioned before that does an echo of the user input, it does not respond to user input. But still prints out "Go on, type something..."
The mac has the .tty and .cu options for ports...which I dont understand yet, (probably the same reason Windows creates two ports also with its dongle), I suppose the answer could lie in there somewhere.
I am kind of lost as to what to try / test next. I was just wondering if this situation stood out to anyone.
So close yet so far. I hope this clears it up a little bit.
About that last note:
When I change the sketch baud rate to be different than 9600. The messages that are printed are coming out as crazy symbols instead of "Go ahead, say something..." I am guessing this has to do with the mismatch in rate?
Thanks again for your reply.