How to use Bluetooth in Android emulator?

You can't. The emulator does not support Bluetooth, as mentioned in the SDK's docs and on several other places.

And you already discovered this yourself: "the adapter is returning null value, which means the android emulator is not having bluetooth capability"

You can install the image from http://www.android-x86.org/ into a virtual machine (e.g. VMWare), find out it's IP address, connect manually using

adb connect <IP of VM>

And then launch your project from Eclipse by setting a "Manual" deployment target in your Debug/Run configuration. Bluetooth works in this Virtual Machine at least on my Macbook and it's reported to work with a couple of other bluetooth chipsets.

I'm currently planning a tool that is capable of emulating Bluetooth over TCP/IP under Linux (will be released freely under GPL).

This should be the solution when not having a real Bluetooth device (e.g. you want to simulate a connection between two emulated Android-x86 or Linux machines).

Maybe when compiling for Linux-ARM instead of Linux-x86 it will run in the Emulator, too.