So, after installing the "May update", as suggested by MS support, I am now able to connect to Bluetooth hotspot. But only once.
If, for whatever reason, phone disconnects, the hospot in Windows goes into perpetual "disconnecting" loop which only reboot can solve.
Curiously BT connection properties show no data being received by the device despite connection working.
Clearly BT support is broken in Windows but at least I was able to connect my old phone to internet to do what was necessary.
Thanks all, bye