My understanding is this is a little bit more nuanced.

For an app to use bluetooth, it needs location permissions as well as bluetooth permissions. Reportedly, this is to prevent an app from using bluetooth beacons to determime your location without permission.

Otoh, it sucks for bluetooth stem toys; you can't use them on an Amazon Fire tablet in a kid's profile, because location permissions are not allowed for kids' profiles.

How is this true? I can easily disable location in apps and in settings.

Its slightly wrong. You can't allow an app to scan for bluetooth devices without giving it location permissions because bluetooth scanning can be used to detect precise location.

Jesus, I had no idea. Remind me to never, ever switch to Android

This works exactly the same way on iOS or any device that supports Bluetooth low energy, since it allows very fine grained location detection. Try it yourself.

This has caused some issues for covid apps since, to use BLE on Android, you need to request the location permission - which people were naturally afraid to do.

If this is truly a problem for you, your statement should be "Remind me to never, ever use Bluetooth". It is nothing to do with Android.

This isnt' an android thing. Allowing BT/BTLE scanning reveals extremely precise location.