Hahaha, yes, that's why I never persisted with it. Typing in manually seems to be the only other way.
Actually I just got interested and tried to transfer my contacts to see whether it works, but got the same results as you have.
On the final step it just sits there, "transferring contacts, please operate your phone"
Operate how ? So when I switch bluetooth OFF/ON, it won't connect again, just like yours.
Anyway, the voice command is much easier, only one button to press.
Cheers.
Btw, while we're talking iPhone bluetooth connectivity:
If you don't get a message alert, but only incoming ring tones on calls, you can divert message tones to your iPhone, but leave calls on car bluetooth.
Here's how:
When connected to bluetooth, swipe up into control centre, select your BT device and then tick iPhone.
The only drawback: It doesn't stick, when you leave the car or switch it off and loose your BT.
So you'd have to do that before every trip. Anyway, just a thought.