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Sounds like you ruled out the IAT sensor itself and generally if the circuit is shorted or open you will get an extreme signal one way or the other (like -30 or 300).
Next step is to verify the reference signal. Should be getting a 5 volt signal to the sensor. The PCM supplies both the 5 V and the ground.
Not sure about the wire size causing the issue. If the IAT is reading too low that should correspond to a higher resistance, and I would expect the larger wire to have a lower resistance. Wouldn't be surprised if you are getting straight battery voltage as I think that this increase in voltage compared to the desired 5V would cause an increase in resistance that corresponds to the temp reading you are getting.
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