On my Nexus 4 my bluetooth headset disconnects intermittently. However, I figured out that disabling the WiFi fixes it. Is this a known issue? Is there a better solution?
I think you figured out the best solution -- disabling WiFi. To the best of my recollection this was a known issue discussed a bit in the forum from time to time. There didn't seem to be any rhyme or reason why some N4's were affected more than others, nor did there seem to be any one solution that I saw.