First of all: Homey does not always use the right instructions for pairing. Check the Walli manual too to see if you use the right way.
Second: Wally used to have problems with S0 security on Homey, so it had an option to include unsecure. As of firmware 7.0 Athom introduced S2 security and deprecated S0 security (so they won’t use that unless explicitly asked).
In doing so, they also changed the way to prevent unsecure inclusion, so your Walli will try S2 security and it may fail on the negotiation process too.
S2 secure inclusion will often require closer proximity to Homey to succeed, so you might try putting Homey close to your Walli (e.g. using a 2A powerbank). But I see you tried that already.
If you want to include it unsecure there’s now an option too using Un-ZCure. It will circumvent the S2 negotiation process, so that may help:
