Now, what could possibly be improved with the feature? You only have to look to Aellin's bank to see the issue. She is down to the point where she can discard her very last bag containing anything useful, or start throwing away hard earned items from many a mogging run. The main issue facing my characters is what to keep, and how to keep what you want.
I think this can be fixed:
With Vaporization, you pay a nominal fee to an Ethereal, presumably the vendor value of any given item. In exchange, your item will be vaporized, adding the model and color to your transmogrification selection window. I think a light blue halo "vapor" border around the item icon during selection would be nice, just to let you know it's part of your permanent collection. At this point, the item is destroyed, leaving your inventory forever.
This feature would allow players to collect their favorite items from old instances, or save pieces that are being upgraded from current content. This is similar to unlocking a certain model/color combination, which I believe is a feature in Diablo III. Add the benefit of removing a little more gold from the economy, i.e. twice the vendor value of the item, and you have both sides of the board whistling a happy tune.
Another aspect of the Vaporization feature is the completionist crowd. These players will keep playing long after the content has ended, just to get that last pair of boots added to their collection. I know a few of these players, myself, and they would love the feature, as much as they would hate it. They will, however, collect everything. It's in their nature.
Another potential hurdle might be deciding whether or not to make the models you learn as a personal selection option, or account wide. There are benefits to making it account wide, like a mount or toy journal, where you only have to find that model once on any server, and it is yours forever. The downside might be lower participation in content, old or new, after players get what they are after.
I'm an advocate of making it account wide, provided the character that vaporizes the item can actually transmogrify into that item. e.g. plate wearers vaporizing plate items only. This will help prevent players from taking items from other armor classes in order to add them to their collection. I can still imagine a number of warriors rolling need on a interesting looking staff for later use, though this likely happens without the feature I'm proposing.
Personally, I would love to have my bags back for crafting, and alternate current-use item storage. This doesn't mean that I would immediately vaporize all of my armor. My void storage would still have my original Lieutenant Commander's Battlegear, Field Marshal's Battlegear, and interesting unobtainable pieces from bygone days of World of Warcraft. But at least I wouldn't have to chose between those sentimental pieces, and new models that will always be coming into my possession.
Thank you for listening, and I hope that you do what I love to do: MOG ALL THE THINGS! :p