Yes, Virginia, there is a Santa Claus. And if current information holds, you'll be looking like one of his elves when you hit Northrend. Say goodbye to your cool-looking level 70 purple gear and say hello to starting over with greens. It'll be like reliving your junior high photo day -- or worse.
Answering a specific question about the topic of ugly, mismatched armor during the WWI Q&A session today, the developer panel gave a cheeky answer:
We ended up having a little clown action, ok, a lot of clown action in TBC. We aren't going to eliminate it, but we are going to improve it. You won't be happy 100%, but we could just solve it by making everything gray.
I think this answer is perfectly reasonable. After all, it gives you an incentive to keep going for better gear: embarrassment.
However, on the positive side, Blizzard will offer more armor customization in Wrath. For example, they will make Raiding sets look different from PvP sets. For me, this means if I spy someone wearing a clear-cut PvP getup, I'm going to get the heck outta Dodge lickety split.