I just had this "problem", this is what you need to do EXACTLY.
1. Go into Settings on your iPhone.
2. Go to "BTstack" and tap on "iOS" bluetooth, not "BTstack", but the bluetooth thing called IOS! You can turn on that Bluetooth there or in your Bluetooth settings.
3. Turn on your iControlpad in iCade mode, u do this by holding down A+B+X+START... let go when it starts blinking.
4. Now go to your Bluetooth settings, navigate to "General" and then "Bluetooth" in the Settings app.
5. When you are in Bluetooth settings page it will now scan for Bluetooth devices, your iControlpad will pop up, tap on it and wait until it says "connected".
6. Now hit your home button and start iMAME4all. Once it's started, just press on your D-Pad or other buttons; a message will popup, dismiss it and now you are connected with the emulator!
7. Use your iCP now to choose a game to play... and enjoy!
The next time you perform step #5 above, you might not be able to reconnect to your iCP in BT settings. To do so:
1) Delete/Forget the iControlPad already paired (which you connected to before)
2) Let Bluetooth Settings re-pair with your iControlPad
You can delete/forget it by tapping the ">" button to the right of the iControlPad device in the list and hitting "Forget".