From what diagrams I'm seeing, the PIP( for which that code is saying is malfunctioning) is located in and part of the EEC IV ignition module. This is a metal "box" usually on the fender well. It will have a connector that has 5 or 6 wires. The PIP portion is were only 2 wires apart from the other 3 or 4 go into the module. The wires connect it with the distributer housing. You can take the ignition module in to auto zone or kragen etc..(depending on your area you live). Most will check its function for free.
There are kits available which turn your old points distributor into an electronic ignition system, i have converted both my veedubs and it removes all of the guesswork & trouble from your distributor. The kit comes with instructions and is very easy to use, you basically just gut your distributor cap & put in a circuit board & boom, electronic ignition. I will post a link below. Oh, and gap your plugs at .024 inches.
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