Here with the good and the ugly.
I have solved this issue. But it was not how I wanted it to be.
1 went to Apple Store had them run diagnostics against my phone. It checked out fine except a hit for software error which they said they could not troubleshoot.
I finally got fed up and left.
2. I went home and connected my phone iTunes and did an encrypted backup.
3. I validated all my contacts were still in my gmail and also my personal calendar.
4. I also had a valid backup up on iCloud from the night before.
5. I upgraded my iOS to 10.2.2 which just came out.
6. I used the restore phone settings in iTunes.
7. When it came back up I selected set up as new phone.
8. After I went thru the initial menus of a new phone setup Bluetooth quit crashing
9. I paired my watch
10. I retested Bluetooth and it continued to work.
11. I restored just my contacts and pictures from iCloud of which I had 4 contacts and about 90 photos
12. I configured my gmail account under mail and pulled all my other contacts down
13. I retested Bluetooth still working
14. I went to iTunes and picked all my apps to put back on my phone
15. Picked all my music / media and brought it down to my phone
16. Spent the next three hours updating apps reconfiguring settings getting my vpn tokens working again and other misc crap.
At the end of the day I have everything working and no more Bluetooth crashing
It seems that the error is contained in our backups and doing a restore of all your data brings the issue back.
If you want it fixed you have to do the work.
In hindsight using airplane mode and the enabling Bluetooth took me about 30 seconds. And let's be real how often do you have to add new devices??
Mine is fixed but it was a lot of work to get back to a full working state.
The one thing that bummed me out was I lost all my text message voice mail call history etc.
Of course they are in a backup file and in theory I could restore that back and have it all but Bluetooth would be broke again. Since a majority of the people I text are on iMessage I still have most of it on my iPad .
I am just sitting here thinking I could have hooked up hundreds of Bluetooth connections over the next several years and still gained back 8 hours of my life.
I did notice there are some software vendors that can crawl thru your iCloud or local backups to get your messages vms and call history back but I opted out of this as an acceptable loss.
Good luck whatever you do. But apple needs to file a bug on this issue. You should not have to dump your life for a small error like this.
I digress