- All items including legendaries and set items are eligible for transmog in D3. In WoW, there are item restrictions that include not allowing legendaries.
- D3 uses item appearances - once an item's appearance is unlocked, it's bound to your account and any character on that account can use that appearance in transmogrification. So if you have two barbarians and one has Unending War, the other can use its appearance in transmog. In WoW, if you have a warrior with Ashkandi, your death knight still has to farm BWL to get it if she wants to use that item for transmog.
- In World of Warcraft, if you want to use an item for transmog, you have to have that item - it's in your bank or void storage tab, taking up space. In D3, once you've unlocked an item's appearance, you do not have to keep that item.
Also, another way D3 is getting it right is the allowing of all items, no restrictions. If someone wants to transmog their weapons to look like fish, or a shovel, or that legendary they have, they absolutely should. I didn't always think so - I supported some transmog restrictions in the past - but seeing how D3 is going to implement it has convinced me that these transmog limitations are arbitrary. Yes, if the mog restrictions were lifted, some people would do silly things, but most people using the service would do that once or twice, giggle, and then be done with it.
I am especially interested in the stance on legendaries. Now, legendaries in WoW are much rarer than legendaries in D3, but even so, no restrictions means no restrictions and with the account-wide use of an item, my various plate wearing strength using characters would finally have full access to my bag full of legendary items. Why shouldn't my poor neglected ret paladin get to look good with a Shadowmourne? Why not let my DK dual-wield my Thunderfury? I wouldn't let any of them use my Warglaives though.
But for those of us who love transmog and therefore have learned to curse bank and void storage limits noticed first, D3's biggest improvement is that you don't need to keep the item. Once you've unlocked its appearance, you can trash the actual item itself. This is a huge improvement. Frankly, it would empty out my bags, my bank and my void storage in one shot. You wouldn't even need void storage anymore, except potentially for those fun vanity items that drop all over the place in Mists and which I have to vendor or delete constantly because I have no room. If WoW only steals one thing from D3's transmog, let it be this.
I think I've pretty much made my case here - Diablo 3 in pretty much every way has dramatically improved upon WoW's transmog. All of those improvements need to make their way back into the MMO, to which they are better suited.