The manual and previous posts suggests wifi is a means to connect to my pc

But is it possible to sync my 8120 with outlook just using the wifi to my pc ie not connecting it via the usb lead.

I cant see any options in desk top manager for a wifi connection or a means to auto launch the sync process.

It would be really cool to know that it was auto sync(ing) while its laying on my desk.

Bluetooth connection allows for wireless sync.

I believe you've misunderstood the manual, and the posts you've read.
WiFi on the Blackberry is not at all for connecting to a PC.
You can't sync via WiFi.

You might be confusing WiFi with Bluetooth.

OK

So if i set up my bluetooth dongle on the pc and pair it to the BB will it auto sync

No, it's quite a bit more involved than that, and it will not automatically sync.
Search the forum for Bluetooth Sync and you'll find a wealth of information on setting this up.

Pair your PC and BB. Then run Desktop Manager. Go into connection settings and set it up for Bluetooth connection (can't remember the exact steps, but just fiddle around with the settings, not too difficult).

After you do this, just run the "Synchronize" command, and you're good to go.