Bluetooth and Wi-Fi will co-exist serving their own purposes: a nice message of co-existence from the Bluetooth Developers' Conference as reported by EE Times. It sounds like the message is finally getting through to both sides: different purposes, different devices. I'm on the fence. I saw Bluetooth makers in the last year veer away from their plans to try to make Bluetooth more heavily overlap in WLAN territory, while 802.11b vendors were talking about Wi-Fi as taking away some of Bluetooth's purpose.
It still seems to me that many of the purposes for which Bluetooth was designed, a fully enabled WLAN device would serve better. Cell phones already have TCP/IP stacks in them; why not produce a Wi-Fi chipset that put that cell phone on a network, not just make it available for ad hoc use?
Likewise, when I hear about Wi-Fi in every pot, I think, Bluetooth was designed for low power output, low power usage, short-range signalling. Wi-Fi was not. Cutting Wi-Fi down to size (as the article notes) would take time and money, and Bluetooth will certainly be entrenched by the time that could happen.
The bottom line issue for any device is: does it need to handle traffic or is it just relaying information? A PDA can do both. A cell phone, mostly relaying. A computer is sending data back and forth; a keyboard, just passing it along.