Mine works well with the iHome iH6. In fact, I find it easier to set up the Touch to wake up as an alarm than my wife's new Nano.
With the Nano, I had to make sure that it is in the "off" mode before I set the alarm. This can be frustrating sometimes because when I dock it in and the Nano needs to be charged, it would automatically wake up and show the charging status. I can't turn it off from there. What happens next is that should I chose to set the alarm to wake up to music from the Nano, it will not wake up when the alarm goes off.
With the touch it's easy. When I dock it in it would wake up momentarilly (the slide to unlock will display) and then go back to sleep if I don't do anything within 5-6 seconds. This I assume is the "off" mode for the Touch.
From there I can set the iHome to wake up to the iPod. After setting the alarm, I can then hit the sleep button to listen to music as I doze off, assured that I would be able to wake up to music the next day.