With Bluetooth on, I don't see how a store will make it through an entire day without going through at least one iPhone battery charge. It would defeat the purpose.
Bigger stores can probably use an iPad instead, but I don't think we'll see a Bluetooth solution for the above reason.
I'd add on top of that, that a bluetooth stream of data could be vulnerable to a nearby hack. If something else than the square device were to be created it would probably make use of cell network.
Actual wireless card device processor cost around $800. That let place for square to come up w/ something.
Bigger stores can probably use an iPad instead, but I don't think we'll see a Bluetooth solution for the above reason.