Okay so Iʻve got this thing working:
1. You need to have the Personal Hotspot feature as part of your cellphone plan. I do with T-Mobile.
2. Donʻt know why, but I had to toggle my iPhone and rMBP Wifi "ON" and "OFF" a few times to get things going. Instant Hotspot finally started working after power-cycling my iPhone and reactivating Wifi and Bluetooth.
3. Yes, Wifi and Bluetooth both need to be enabled for Instant Hotspot to work.
4. Make sure Wifi and Bluetooth are both "ON," but Personal Hotspot is "OFF." Donʻt try to use the Instant Hotspot feature with Personal Hotspot set to "ON" on your iPhone. It seems, Instant Hotspot is made to work, only if Personal Hotspot is set to "OFF." Explanation at the bottom of my post.
5. This is the lucky part I guess, but if you have the right hardware and nothing else is "bugging" out. If you look in your Wifi drop-down menu you will see a section directly below "Turn Wifi On/Off" labeled: Personal Hotspot.
6. As weʻve all seen, this section will display "____name___iPhone" then off to the right, signal strength indicator dots, LTE, battery display, circular links (representing hotspot).
7. Choose your iPhone from the Personal Hotspot section in your Wifi drop-down menu.
8. Hopefully if all goes well, your Mac should connect to your iPhone.
9. Key step for me was, I think, power-cycling my iPhone "OFF" and "ON" after the update. Go figure...
Interesting Observations >>>
I noticed that, now, if I go into Settings > Personal Hotspot, and attempt to toggle Personal Hotspot "ON," it immediately turns Wifi "OFF" on the iPhone. Iʻm assuming that since both the iPhone and MBP are communicating with each other via Bluetooth, that the iPhone defaults to shutting down Wifi on the iPhone as this is how the Instant Hotspot feature is supposed to work.
If you turn "OFF" Bluetooth on both your iPhone and Mac, then youʻll once again be able to toggle Personal Hotspot "ON" and "OFF" on your iPhone. And then of course youʻll see it show up normally in your Wifi drop-down, along with any other Wifi networks your Mac detects.
Hope this helps!