I've solved it. The problem was the computer was expecting the mouse to have a pairing code. Which a mouse/keyboard wouldn't have. You can make it realize this if you try to pair in desktop mode only. 
I have an Inspion N5030 running Windows 8 with the Dell 365 Bluetooth chip installed. Up until recently I was able to use my chip to connect a Sculpt Touch Bluetooth mouse, but as of late, I am not. When I place the mouse into discovery mode I am able to see the mouse, but when I try to connect to it I get an error that says, "That didn't work. Try again and make sure your mouse is discoverable." I know the Bluetooth chip is still working as I am able to control my iPhone from the computer. I have all the updates installed for my system, including the driver for the Bluetooth card. What could be the problem? What can I do to fix it?
Cannot connect Microsoft Sculpt Touch mouse