i always heard that "bless you" was meant as protection against evil, due to the folk superstition that the devil or other malevolent spirits could enter your mouth during the act of sneezing. the entire phrase may have actually been "god bless you and may the devil miss you."

"gesundheit," while a handy substitute, actually means "health" in german, and the proper response is "gesundheit ist besser wie krankheit (health is better than sickness)."

http://www.california-books.com/sneezing.htm said so. blame them if i'm wrong.