Here is the simplest way to put this. The process of rooting gives you complete administrative rights over your phone. In the linux world the "root" account has complete system access (like admin in the windows world), hence the term "rooting" your phone. However, by itself the process of rooting does not change anything on your phone. You are still running the default Sprint ROM. Once rooted though, you are free to flash any ROM you'd like. Fresh 1.1 is a ROM. It is a modified version of the original Sprint ROM, which is based on Android 1.5. There are many other Android 1.5 based ROMs as well (Pancake was one).
Now there are ROMs available that are based on Android 2.1. The first ones to appear were based on a Verizon version and hacked to work on Sprint. However, one of the XDA developers got his hands on a leaked 2.1 ROM from Sprint. There are a few different ROMS out that are based on it. I am currently running Damages 2.05 ROM and am quite happy with it. There is also Fresh 2.0d (since you already run Fresh 1.1) and I have heard good things about it as well.
I hope that gives you a little more understanding about how this works. Now to specifically answer your questions about bluetooth. BT never quite worked right for me on the original Sprint ROM or the custom ROM's based on it. My problem was that when I would pair the phone with my BT system in my car, I could make calls okay but if someone called me and I answered, the BT connection would drop. Kinda sucked. Since I have been running Android 2.1 based ROMs, my BT has worked flawlessly.