No, your current sets are automatically imported into a "custom sets" tab that you can call on as if it was a tier set

It's pretty darn neat! Understandably people have concerns, the cost feels like the only issue and the MOST actionable, fixable thing so I'm not terribly worried. They'll find some level of friction people can put up with

Nothing unusual, no

5 sets were used here.
I mostly wanted to demonstrate that yes, while some will want to use their outfit slots to make entire ensembles, there're options available that let you keep favorite tweaks and add flexibility.

This is what happens when I jump in the water, but whatever weapons I'm wearing won't change. All mog slots switch to invisible except for weapons so there's no cost to set this up at all.
When I leap back out, I change back to this first outfit.

This outfit happens when I enter my home. Here I remove my helmet, shoulders and chest, and display this shirt (4 mog slots, only pay for the shirt). Happens no matter what I'm wearing.
When I leave, my outfit will change to the closest situation that meets requirements.

You can set up an outfit where you see the actual unmogged gear, so for example you get a sweet new weapon and wanna show it off for a while, you don't have to make a wholeass outfit, just have one button to undo transmog on your current weapon/armor.

In this shot I activated the outfit "favorite weapons." Here, only the weapons change. No matter what other mog I'm wearing, when I use the outfit my weapons will change to these. This outfit only uses 2 mog slots (main/offhand).

It does. The situation outfits are a new-new feature so I'm not so certain I'll need more than a handful of sets, just think the cost per gear slot is too high and discourages casual modifications.

When using test builds to measure how much players will put up with friction, it's just easier to start high and work down