I completed my first Legion timewalking dungeon. I got the quest to get my 500 TW badge but it was to turn it in shatt not Dalaran.
Should it not have been Dalaren with the Legion TW?
There’s two timewalking events going on rn, Legion and BC. Not sure if the Legion one will drop this week. I’ve done a couple of Legion ones and have only got the BC one.
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I wondered how it would work with two up at once, I would expect a hot fix in a day or two to let both items drop in the correct dungeons
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You only get the 500 quest once per event. Since the Legion one is lasting 4 weeks, you’re only going to get that one once in the 4 week period of time, but you can now get the TBC one, if that makes any sense. 
Not true, I got the bonus 500 every week for the first 3 weeks of legion on my paladin
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I only got it once, though, and other people have been reporting only getting it once. Maybe your experience is an outlier.
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What?!? You’re suggesting a bug in this game! Joking, if it worked in my favor I got lucky because I needed those extra 1500 to get the new shield transmog
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So I got both items from the last boss in a dungeon. Not sure how the drop is determined. 