Your model has a seperate switch for the bluetooth on the front center of the laptop (just to the left of the WiFi switch) Make sure it is ON, a light should indicate that it is on. Seen on page 4 here -> http://tim.id.au/laptops/acer/aspire%201650.pdf
In device manager, are there any "unknown devices" or items with yellow triangles on them?
If yes: Driver may be missing, or corrupted. Download latest drivers from the Acer website.
If no: Are the USB ports working? Do any of the USB ports look like they're missing any pieces? The BT Module is connected via USB internally. If a problem exists on a USB port, it could keep the bluetooth from recognizing.
The bluetooth module is secured with two screws to the underside of the palmrest (see link above), so I doubt that it has come loose. It requires a fair amount of dis-assembly to check. I would have this done by a professional if the above steps don't work.