Found the answer - when prompted for the passkey, you enter 0000 and hit the enter button. Then you enter 0000 on the keyboard itself and hit enter on it as well. Works just fine as I am typing this on the keyboard right now.
It's funny how a company as savvy as Microsoft would leave out a whole couple of steps in their instructions and on their support pages. That's just one of the differences between it and Apple.
VZN support wasn't any help either. They don't even show it as a supported device, even though they have other keyboards listed other than the Moto keyboard that they sell.
PS, it's a pretty cool keyboard. Doesn't have a mouse or a keypad, but it's compact with a nice slight curve that makes it comfortable to use. I might post about it in the accessories portion of the Razr forum. I got it at Amazon for around $35.