This is not the first time this has happened. Personally, I have been through at least 2 or 3 near full gear resets just since they started doing squishes.
this will probably be fixed, but always prepare for the worst.
The first time it happens to you it definitely sucks, but you eventually realize that's just how it can be long term and you learn to adapt.
Worst case scenario, you have to re-farm a few slots, sometimes even all of your gear.
Best case scenario, you end up with GF pieces that are no longer obtainable, and sometimes even BIS.
Like in the past, Blizzard probably loaded some type of default template for gear scaling while they fine tune the squished item levels. The template probably still had the original level requirements.
Chances are it will get fixed, but these days who knows.
If new drops from TBC dungeons on the PTR also have broken level requirements, then it twill definitely get fixed.
Above all else. DO NOT DELETE unique gear that may seem useless before/after the squish.
We have so much bank storage now that there is little to no reason not to hang on to gear that you worked hard for, or that can only be obtained once.
Hang on to gear and items with unique procs, on-use abilities, sockets, warforged, etc.
They may be useful again in the future, certain types of socketed gear may never be obtainable again.
Before the current meta with TBC/Wotlk sockets and TW gear, Warforged was king.
Before Warforged gear....well it was TBC socket and Green BOE with Sockets
It tends to cycle between a few different types of gear being BIS
When Warforged gear got nerfed, those of us who hung on to our socketed/tert gear from the previous meta were already set for the most part.
Even now I still have a full set of WF gear stashed in the bank, along with tabs full of TW gear, alternate socket pieces, old epic upgrades, and loads of GF pieces no longer obtainable that may not be useful now or ever, but they might, its happened before a bunch of times and its glorious when it does.
Times Change.