The old code was connecting the KIconLoader signal to implicitWidth/HeightChanged but never actually set a new implicit size.
Also, while at it use "setImplicitSize" - it's also marke internal but public like setSize and uses qreal instead of QSizeF.

Comes with a unit test

Also ran the following in qml scene and changed settings, the icon item would adjust itself:

import QtQuick 2.2
import org.kde.plasma.core 2.0 as PlasmaCore

Item {
    width: 500
    height: 500

    PlasmaCore.IconItem {
        source: "user-home"
    }
}

I wonder if we shouldn't scale the implicit size with Units