The item quality sanctify bonus is not currently working for ancestral items that have been fully masterworked.
How I found this: I have two Grandfather mythic uniques that both rolled a bonus to maximum life on the base item and were both masterworked to provide a bonus to %damage as a masterwork crit, meaning both items were perfectly identical before sanctifying them.
One Grandfather was sanctified to receive a bonus affix roll to %damage and that one is working properly, but the other Grandfather was sanctified to receive bonus item quality (+36 for +61 total) and the bonus item quality is not currently being applied. My overall stats (all stats, maximum life, and maximum resource) remain the same while the %damage drops by the difference between the unsanctified amount and the sanctified amount.
I tested this out on a number of items that were 800 item quality base and it appears that if you have masterworked an item the bonus item quality granted by sanctify will not apply at all, even if the bonus quality is higher than the 25 item quality bonus from masterworking. If you have not masterworked an item the bonus item quality from sanctifying is applied properly. I don’t have the materials and gold to test this on 750 item quality items, so I have no idea if it’s the same for all items or just ancestral items.