I did a bunch of searches and thought my band was busted. Turns out it just wasn't intuitive.
I have a Lumia 920 (waiting on the 940 or 1040 please!!!!) and had been using the band frequently. At some point I noticed that the band icon turned into the MS health app, but I never bothered to launch it.
It stopped texting and toasting, which was annoying, and I thought I had banged it against one too many doors, or sweated too hard during a workout. I shut of Bluetooth on band and phone, paired them again, tested the watch with my wifes phone, couldn't get blue tooth to stay "connected". It would connect briefly, then just show paired.
un-paired, rebooted, tried it again, checked for updates, checked forums, found lots of posts complaining about something similar.
Turns out it started working well, all I had to do was to launch the MS Health app on my phone, then it stayed "connected". Whoops. Glad I got it working before going out to MS Ignite in a couple days... the toasts are very valuable to me!
TLDR: If your band keeps going to "connected" and shows the grayed out Bluetooth symbol, you may need to simply launch the MS Health app
hope this saves somebody the hour of heartache I just went through...