Personal Hotspot stops when phone locks?

Yes, it stops broadcasting its SSID when you exit the personal hotspot settings screen or lock the device. Wireless clients that are already connected should stay connected, even without the broadcast. I've had my MacBook Pro, Linux machines, and my iPad stay connected to my iPhone hotspot all night while it was sitting locked and unused.

Incorrect. The personal hotspot continues to function while the phone is locked.

The Personal Hotspot disconnects is there has been no activity for a period of time. Sorry, I don't remember what the time period is. Five minutes?

It seems to me that if your iPhone and any devices using your iPhones hotspot are inactive then the hotspot should time out and stop. This would be done to save battery use on the iPhone.

The other reason to have the PHS time out is for billing purposes. My carrier bills all data the phone against the hotspot's allowance if the hotspot is active. Even though I have unlimited data, I only have a 2 gig allowance on th hotspot. The system works for me.

Connecting my iPad 2 to the hotspot broadcast from my iPhone 4 (both running iOS5) the hotspot temporarily disconnects (& the blue header reminder on the iPhone screen goes out) when the iPad goes to sleep but then reconnects automatically when the iPad wakes up. This makes sense in case the iPad is running sites (such as video) that might continue to run in the background.

That is the reason I use bluetooth. You can always connect to PHS using bluetooth. You have to manually connect on the device you are tethering from but you don't need to open PHS on the phone. Just make sure you have BlueTooth enabled and PHS on.

Never knew with bluetooth you don't have to open PHS again. Thanks a lot for the tip.