My personal take is that it's a horrible idea. I think having epic gear look good and not so epic gear look not good is all part of the motivation for me to get epic gear. But instead of just being a nay sayer, I've thought up a simple solution.
A lot of players are already carrying a separate set in their bags for vanity purposes. There are all kinds of great add-ons (like Outfitter) that allow you to swap all your clothes at the click of your mouse. I like this. I think this suits game play better from a role playing perspective. When you're out in the middle of Netherstorm, you're gonna wear the best gear you got to protect yourself, but when you arrive in Stormwind, you wouldn't trudge around in your armor. You'd get some stylin' city clothes on before you hit the pub.
Blizzard had mentioned plans of bringing Outfitter functionality to the game as a standard feature way back at Blizzcon for raiding purposes. Wouldn't it be great if they integrated vanity features as well? They could give us options to automate gear swapping based on what zone we're in or what day of the week it is!
So what do you think? Should vanity gear come to WoW or does it kill gear progression?