THANK YOU! This post probably saved me giving up on the blueSmirf altogether.
I have to add one additional hurdle I had. When I first tried to pair with my computer it reported the device as unknown. When I tried to connect it it failed no matter what I did. Nothing I tried worked until I rebooted my computer.
After rebooting it saw the device name correctly but it failed on the passcode attempt. I had to switch to manual to enter 1234. Everything after that worked exactly as you described… you weren’t kidding about the 60 seconds!
I am using 10.6 snow leopard and I have noticed some funkiness with the BT. I hope this is fixed in future updates.