I dont know if it helps, but I had a similar experience and thought I'd tell you about my fix. For some reason when I upgraded my phone to a Droid Turbo, my new phone was unable to connect to my awesome Motorola stereo headphones-- I was getting the same "incorrect PIN" message you were getting. I struggled for about 40 minutes. Here's the fix-- maybe you can make some use of it to your issue.
Step 1: Clear the cache. What I did was to look into the headphones manual and press the button combination to "clear all paired devices" from the system memory. I'm not an expert, but it seems that the bluetooth device (the accessory, in this case your iHome, in my case, a set of stereo headphones) stores trusted devices in a kind of cache to make connecting quicker. By clearing this, I was hoping that starting with a "clean slate" would help me.
Step 2: Manually put the device in Pairing Mode. When you first take a new accessory out of the box and start it up, it defaults into "pairing mode" because its never been connected. But after you pair with a device, subsequent power-ons no longer boot in Pair mode anymore-- because now itas looking for familiar devices, right? So I put the headphones into its default "pairing mode" so that it was waiting for a new pairing request.
BAM fixed the issue. My phone saw the headphones in the "Available devices" and I was able to pair with it without a hitch.
Hope this helps.