Unanswered Questions about Transmogrification

I have a few unanswered questions about Transmogrification.

1). Does the item I change have to be the same level(or item level) as the one I'm copying?
For example, If I wanted to change my level 85(il-346) Axe, to Shadows Edge (which is a level 80 weapon) could it be possible?

2). When I do the Transmogrification process does it destroy the original item?

3). Could I change a Blue item to look like a green? Or does it have to be Epic to Epic, Blue to Blue or Epic to Blue?

4). Can you change the look of heirloom gear?

5). Will the drop rates of Vanilla and Burning Crusade raid gear be bumped up, so we don't have to keep farming the raids for the gear that we want?

If I could have someone from Blizz or someone who has had these questions answered before, post the answers, that would be great :)