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The "me 'ead 'urts" rule (p.76) states, "A unit that fails its Stupidity test immediatley stumbles D6" forwards--this move is otherwise treated in exactly the same manner as a failed charge. The stuipd unit cannot take any further action that turn, so cannot declare charges or make a shooting attack." What happens if the d6" forwards would bring the stupid unit into contact with an enemy unit? Does the stupid unit stop 1" away or does it do a charge?

Stops an inch away.

I go with inch away as well, considering it counts as a failed charge.

The only way you can move into combat is to succesfully charge, or count as doing so. Here you specifically failed charge, meaning you cannot go into combat.
1" away.