Couple of reasons why this theory fails:
Firstly, iron is one of the most common elements on Earth, accounting for nearly 1/3 of the Earth's mass (32.1%). So this would mean the meteor made of all iron, would have to weigh 32.1% of the present Earth's mass to be the source of all iron in the Earth (assuming the collision wasn't too elastic). A meteor weighing 32.1% of the Earth's current weight and 47.3% of the "pre-iron" Earth's weight would do much more damage than a mere extinction event.
Secondly, without iron to carry the necessary electrical currents for Earth's magnetic field to exist, the Earth would not have been protected from the Sun's solar winds. Under such deadly charged particle bombardment, life would not be able to be develop to the point it was prior to the K-T extinction event.
Thirdly, "Iron is pretty much essential to terrestrial planets in general.", it's not something that gets added for the first time billions of years after a terrestrial planet has already formed; especially without affecting the planet's orbit.
Fourthly, it's already known that the Earth was partially-composed of iron, billions of years before the dinosaurs existed.
Fifthly, that's a horrible theory, just horrible. One of the worst I've ever heard.
No need to argue, the theory fails on its own.