It is indeed possible to use custom URL schemes for authentication in an iOS app. Here are the steps I took:
Choose an arbitrary domain, like stackexchange.com, for the OAuth domain in your Stack Apps
(Optional) Make sure it has a Stack Apps Post if you want tokens with write access.
Check the checkboxes for these options:
Enable Client Side OAuth Flow
I am not familiar with iOS programming but it seems your end point is invalid. As a result you will get "page not found" HTML response.
Instead of using http://stackexchange.com/oauth/2.2/users?order=desc&sort=reputation&site=stackoverflow&Client_Id=5029, try to use https://api.stackexchange.com/2.2/users?order=desc&sort=reputation&...