Bluetooth Passkey Dialog Box Not Displaying

OS: Monterey: 12.2.1

Device: Apple Wireless Keyboard

Hi,

I recently received a new M1 MBP for work. I attempted to pair my very legacy Apple Wireless Keyboard to it. When I select "Connect" no dialog box with the passkey displays. If I enter random numbers on the bluetooth keyboard than it enter, the dialog box with the passkey appears for a split second then disappears. In the Bluetooth SysPref dialog box, there is now a little notation that displays "Connection Rejected"

I'm going a bit crazy trying to solve this!

I've tried accessibility to have the computer read the code to me (unsuccessful).

I've tried the Keyboard SysPref (instead of Bluetooth), with the same behavior.

I've tried entering both '00000' or '123123' unsuccessfully.

I've also created a hot corner to display "All app windows" (unsuccessful).

I've tried to change the theme as well, unsuccessfully.

I am out of ideas, it is like the computer thinks it is displaying the passkey dialog but...it isn't. Any advice would be greatly appreciated.