I'm not sure I understand the difference between "Just visuals ... small restrictions" and "Just visuals ... strong restrictions"
I've picked "Just visuals ... small restrictions".
What I have in mind :
The player will be allowed to merge two items of the same type together. One would define the "skin", the other one would define the stats. Both items are "destroyed" to create a new one.
This could be done to all weapons and wearable equipment. But again, the "transmogrification" could only be done between items of the same type (like a 2H Weapon with another 2H Weapon).
EDIT: I saw the response explaining the difference between 3. and 4. afterward.
I can't change my answer but I would change it to "Just visuals ... strong restrictions" if I could.