Enable Internet Sharing over Bluetooth PAN
Maybe you need to update Snow Leopard via combo update. It happens sometimes that an earlier version has problems with internet sharing (sometimes even an update could break it). 

For example I could not establish successful Internet sharing on OS X Tiger 10.4.11, but with 10.5.8 I had the best experience. 

For Snow Leopard, maybe you could try 10.6.8? 10.7.5 Internet sharing is working, although sometimes, it's not fully stable. It can be that you need to click on connected iPad/iPhone and same time on "Connect to" on established Bluetooth connection on the Mac to get it working.