I bought a CSR Bluetooth 4.0 dongle, when plugged into my computer, initially my iPhone 5 could not detect it, but if I set the dongle to broadcast as Headset mode in the Bluetooth settings, the iPhone detects it instantly. I don't have any knowledge of bluetooth, but I'm wondering how to configure the Dongle (what tools/software do i need) so that if say I plug it into a USB car jack, the iPhone can detect it right away.
Take a step back - what are you hoping that this dongle will allow you to accomplish?
Are you expecting to be able to use your car stereo as a hands free device? Play audio from your phone to your car stereo? Neither is likely going to work unless your "car stereo" is actually a full fledged computer.
In general, most car stereo USB ports only have support for USB as mass storage, e.g. reading file systems (usually FAT32), and will not have drivers to support a USB Bluetooth dongle.
The iPhone supports a limited number of Bluetooth profiles. That's why when you set the dongle to be a headset from the computer, it was detected.
The dongle itself is a dumb device - all it does is talk Bluetooth, but it doesn't know what to do with the signal. That's where the device driver comes in, and that uses the computer to process the signal (which the dongle has passed via USB to the operating system).