Have you tried pairing with another Bluetooth device? That would determine if the phone is capable or is not working. Alternatively, you could try pairing the device with another phone. Either of these will help you to determine if it is the device or the phone at fault.
Have you tried a hard reset of the phone yet? Have you connected the stereo bluetooth with this phone before? Not being able to either connect a device or delete old connections sounds like it may be time for a hard reset or restore from backup. Let us know when you find a solution.
Boot into safe mode and then you'll be able to forget the Bluetooth device. You can use SBSettings to boot into safe mode if you have it installed. SBSettings > Power > Safe Mode.
If you don't have SBSettings, you can boot into safe mode by pressing the volume up button while booting. Then reboot after you forget the device and the phone will go back into regular mode.
I have a bluetooth headset that took a while to figure out. Check to see if there is an iPhone application. the bluetooth headset I have connected to my old Blackberry Torch right away but I read the pamphlet that comes with it and there was an application for Android and iPhones.