Still broken after today’s reset.
In Blizzard’s defense, this was only reported about three months ago.
. . .
I wish my job was like that:
Boss: “Hey, did you resolve that ticket yet?”
Me: “It was submitted in August, STOP RUSHING ME!!”
Boss: “Ope, sorry, I’ll check in with you in February.”
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Are they seriously not fixing this? If DF releases and fated raids end, then they will have even less reason to fix it.
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it’s something at least… 
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I don’t know why this is still bugged after all this time.
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This seems to of been fixed on current beta after a lot of back and forth with xmog, I was able to get both on use unlocked with a fated lfr version and successfully xmoged both to the back version. Just not sure why it doesn’t work on live, maybe with the 2nd phase prepatch. Tested this today as I just got it with dinar coin specifically for frost dw transmog.
I just checked it in on the PTR its working already, I guess the fix might come this next reset? since the PTR has the prepatch event which is also coming this next reset
I just tried on beta, looks like it turns the heroic and mythic versions into the normal version when switched to the back. So still bugged in some cases
This feels like a recent bug fix I worked on:
Boss: “So, it’s not giving users the [insert error here] anymore?”
Me: “Nope!”
Boss: “Great! Glad to hear it’s working normally again!”
Me: “Woah there, I didn’t say that.”
This is still bugged, the mythic version transforms into to the normal appearence, not the mythic one. I sincerely doubt this will be fixed lol.
It is working already on live click the on use of the fated version, then go to a transmog vendor or mount then right click on the devouring cold sword there should be two options that will pop up one of them will allow you to transmog it at your back xD
Just because it works for the normal and heroic versions doesn’t mean it works for mythic version. I have changed it back and forth after upgrading the item to mythic and it constantly reverts back to the blue normal appearance, not the red one and will not unlock the mythic red transmog (see screenshot below) . 
Can confirm. Mythic version still broken :
Yeah it goes and sheaths on back now, but doesn’t retain the Mythic skin. So you can’t unlock the back sheathed Mythic skin.
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Can confirm it is fixed on live game. Once changed it becomes the first option of the sword for transmog in the transmog selection for the sword. It doesn’t show it sheathing on back in transmog window or character view screen but does sheath on the back on your actual character.
Progress!
Well, they’re getting closer to fixing it.
Yep still broken for Mythic version
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My mythic version is turning into the heroic transmog when it’s changed to the back slot. I would almost prefer the normal version because I’m not a fan of the gold gear from heroic.
Edit: It’s probably because I don’t actually have the normal appearance unlocked.
This is still broken for Mythic and Heroic versions. When you use the item to change it to your back, it switches to the appearance of the lowest tier of the appearance you have unlocked. I have the normal and mythic, so when switching it to the back sheath it changes to the normal appearance.
Edit* this also means you can’t unlock the transmog option for the back sheath on the mythic version.
This seems to be only a problem when you upgrade the item to a higher difficulty. I managed to nab a Mythic Devouring Cold from fated mythic KT last week during our guild raid and its effect worked and unlocked the red mythic back mog for me, the version I had which I had upgraded from normal earlier did not unlock the mythic mog.