is “if i were you” correct? if so, why?
Yes, it is correct because it is in the subjunctive.
You are posing a hypothetical scenario. “If I were you, I would stop that immediately” [example].
In other words, you are saying what you would do if the situation were [see? there it is again] reversed and you were in the other person’s shoes.
As you can see, modals are also involved.
This must be the most boring of all my posts. 
That is correct grammar.
“Were” is the subjunctive mood. The subjunctive mood is used to express an act that is conditional on something else happening. The condition in the example you gave is that you would have to be the other person.
“If your grandmother were to call, I’d drop dead of a heart attack” is another example. The condition is your grandmother calling.
Robin
It is correct. It’s the subjunctive, as opposed to the indicative, mood. It shows conditionality.
Compare these two sentences:
“He was sick, so I visited him.”
“If he were sick, I would visit him.”
In a lot of variants of English, the subjunctive is tending to fall out of use. A lot of English speakers would say “if he was sick, I would visit him”, and in many (most?) variants of English, this is probably an acceptable alternative use.
Ah, yes. Some do use “was”, finding the use of the subjunctive verb form to be not worth keeping around.
Ah, yes. Some do use “was”, finding the use of the subjunctive verb form to be not worth keeping around. But “were” is correct.
Earlier replies have explained the subjunctive, but note that sometimes “If I was…” is the correct form. Compare
If I were there, I would have stopped him.
If I was there, how come nobody saw me?
I understand and agree that “If I were you” is correct grammer, and that it is subjunctive, and all the rest, but I don’t think that anyone has explained the why part of the OP.
Why “If I were…” instead of the obvious “If I was…”? There is no ambiguity or loss of meaning with the latter.
My guess is that it is one of those rules of grammer that did not come about from common usage, but was foisted upon us by some student of language that realized that “If I was…” violated some law of reason. In other words is similar to the rule that says “that is I” is correct over “that is me”. In that case “is” was recognized as analogous to the equal sign in math therefore “objective form” = “objective form”. But now having presented the theory I can’t come up with the rule of reason that it rests upon.
However, that obnoxious song that goes “If I was invisible…” a billion times throughout the song is definately and totally incorrect.
I’d guess just the opposite. Since usage defines the language, it came from somewhere. I’d guess Latin/Romance languages and German, which both have subjunctive moods, and maybe their antecedents. Because of the use defining the language thing, we see a gradual loss of the use of a separate subjunctive conjugation. I’d argue that “If I was rich, I’d have a lot of money” is still subjunctive, but merely the conjugation has changed (and for the worse, I’ll editorialize).
Interestingly enough, this is happening in other languages. My wife (and Spanish teacher) in teaching me the Spanish subjunctive said that depending on whoever it is I’m speaking to, it wouldn’t really matter – use the past imperfect just as well to convey the subjunctive mood.
Don’t look for too much logic or reason in rules of language.
No, as Balthisar said, quite the opposite. It used to be a standard feature of English (for instance, check out this page on the subjunctive in Old English). Also, there are subjunctive constructions that don’t use the “If”, and they make a clear difference between “was” and “were”:
"Was I to … " = “was I supposed to”
"Were I to … " (subjunctive) = “If I were to”