I have a dongle (not this one). All I had to do was to connect it and viola- it did whatever on its own. It should be the same provided it works with windows 7. Did you try restarting the system while its still plugged in.
it seems from ur image as if your bluetooth is not enabled...
BTW try dis yaar.. press windows + r
type 'services.msc' press enter
Double-click the Bluetooth Support service.
If the Bluetooth Support service is stopped, click Start.
On the Startup type list, click Automatic.
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