#1 - June 16, 2016, 10:05 p.m.
If you have an item already upgraded to it's maximum appearance (I used a 6/6 upgraded Crystalfire Spellstaff), you do NOT unlock it's previous two appearances. Only it's final appearance.
If you have non-soulbound crafted items (I used a Wayfarer's set of crafted mail), upgrade them, and -then- bind them to you, you only unlock the appearance it has when you -bind- it.
If you soulbind a crafted item, and -then- upgrade it, you do NOT get the upgraded appearance, only the appearance it had when it was bound. Because of the change in the transmog system, you can't even transmog to the upgraded appearance even if you keep the item itself.
I am not sure if it is meant to be this way, or if it is some sort of technical limitation, but I do not think that it -should- be this way. If we as players worked to upgrade an item, we should not lose the appearances that that item had during the process of upgrading it. Nor should upgrading an item -after- you bind it NOT give you the upgraded appearance.