It sounds like it doesn't work or most things? Is it basically useless now?
It works on chest armor, gauntlets, and boots, just like it always has.
Also, if it does work on something would that change in the item prevent you from making any other upgradeable changes you should be able to make through crafting or blacksmithing?
It doesn't matter. The only effect of the Grail other than the color change is that it very very very very slightly increases its value, so it's mostly used on things you're selling off anyway. If you're worried, you can always save, test it and then load if it doesn't work.