Help: Bluetooth Mouse and KB Connectivity Problem

I'm not exactly sure why, but my apple wireless keyboard (previous version; white) and mouse (single button) does not want to work with my G4 iMac.

Both devices work fine on my Macbook.

on my G4 iMac, I do not have a built in bluetooth module, so i found a bluetooth dongle lying around at home and plugged it in. It instantly recognized the dongle.

While pairing the devices, it stalls on "connection established" and doesn't move forward.

When i go looking under "bluetooth devices" in the "system prefs", both devices are listed and for each, says:

Paired: Yes
Configured: Yes
Favorite: Yes
Connected: Yes

however neither the keyboard nor the mouse actually works.

I'm thinking it might be the bluetooth dongle that's not "compatible" ?
It's a no-named brand, so would purchasing a D-Link one remedy the problem? Or are there other recommendations?

Thanks for any help I can get

 

before i go ahead and take the plunge to order a new bluetooth dongle, i gave my current dongle one last attempt.

Just to update a bit about the details of the pairing process:

1. When i choose "use empty pass-key" the pairing process stalls and does nothing.

2. When I choose to "generate random pass-key", the pairing process is waiting for me "Please type the following passkey on the keyboard you are setting up, followed by the Return key" and they give me a random 8-digit number. Is this not rather odd? How do i key in this "input" to the computer if the keyboard isn't already paired? I don't believe it asked me to do this on my macbook.

3. When I choose to not use a passkey, it goes through the pairing process and says the keyboard is paired and is ready to use (even though it's not paired and not ready to be used -_-")