Is it possible to connect an external camera via bluetooth to the Iphone 4 and use it with Facetime, if not.. why?

No.

because this is not a feature of the iphone.

Bluetooth is supported for stereo headsets/speakers, handsfree telephone devices/headsets, some peer-to-peer apps from the app store and tethering where provided by the carrier.

http://www.apple.com/feedback/iphone.html

I have to ask: why? There's a camera to show your face, there's a camera to show your friend what you're looking at.... you want another camera to show what's to the side?

Not sure how it would work with facetime but here's something...

http://www.amazon.com/Looxcie-LX2-Wearable-iPhone-Android/dp/B0055QYIY8

Ok, in 2015 is it possible now? I would like to use an iPad and Face to share content between a dressmaker in Asia and a customer in the US, and I would like to attach better camera's than the built-in camera's on the devices.

Any thoughts? Any updates to the original post?

Thanks,

James

Still nothing available and Bluetooth would probably result in a further degraded image due to the limitations of Bluetooth itself.

Is this possible now?

No.