You have to finish a Questline in Scholomance. Therefore you will get a Trinket which will make you able too see the Ghosts on the Island where Scholo stands. One of them sells some Alchemy Stuff like Greter Mana Potion Recipe and this Transmute.
As i remember you can finish the Questline with one Scholo Run but you should have a group which will wait for you all the time you go in and out :-) You get the Quest just outside Scholo
The quest you have to do to see the dead vendor is the Butcher quest where you have to kill the 3 people in scholomance. It can only be done with a 5 man group not a raid.
After you hand in the quest you just get something to kill you and go see the vendor, that simple.
Please note - Transmuting Arcanite activates a global Transmute timer of 2 days, during which you cannot do Water to Air.  However, WtA transmute should only cause a 1 day cooldown, and makes more profit per use.
To see this vendor, you must complete the Scholomance quests given to you by Eva Sarkoff (Doctor Theolen Krastinov, the Butcher -> Kirtonos the Herald -> Krastinov's Bag of Horrors) to get the Spectral Essence trinket. Equip that and you can find him. He's located in one of the houses on Caer Darrow.
There's also been rumors of priests being able to see this vendor after equipping an Eye of Divinity, however I don't have a priest so I can't confirm.
Tried using elixir of detect undead. didn't work and I was only able to detect the two ghosts infront of the entrance and the artist outside western wall.
This is a little guide to show you how to buy the recipe's without doing the quests in scholo
First go to TM and binder your hearth stone there. Then go to Sen'jin Village and talk to the wich doctor and get the buff that makes you see ghosts. After that immediatly hearth to TM.. Follow the river on Mount untell you get to the bridge enter the town and there will be a Blacksmithing house on the Left. Enter in there and buy the recipe's...
Also you hafta have the Zalazane quest finish for the witchdoctor to cast on you..
Thanks for the WOW economics lesson, but what I need to know is how to find this item. I have looked all over the suggested area and could find nothing in the BlackSmith or any other buildings. Is the vendor a ghost and I just cant see him or what?
... on my server >.> because essence of water sells for up to 5g and essence of air for as low as 7g sometimes -.- transmute arcanite tip is only 2g usuallly as well
I'm maxed at herb/alch too, and I've found that all transmutes are now going down in price. I used to be offered 10g for an arcanite bar transmute, and now I have trouble even getting 5g for it. Also, the cooldown for the arcanite transmute is 48 hours, and I'm not sure about the essences transmute. Never done them for anyone.
On Daggerspine acanite trans is 5g, I sell living-earth for 8g and Ive seen water-air for 12g. The market value should be the major factor of the tranmution prices. If you think the services are too expencive just shop around and if you are the Alch then it is up to you to decide who you want to sell to and as in the real world if you want repeat business then you will price accourdingly.  Now that I am happy with the guild that I am in, I dont sell to anyone but my guildies-- so I dont charge just get things in return.
If you really want a good price do like I did and create more ava's and stop complaining about prices and do the work yourself! Then come back to this forum and post your feelings about the work other ppl do and how much you apprieciate thier effort.
I'm and herb/alch ... all transmutes I've ever done have a 48 hour cooldown.  Can do arcanite any time for 4g ... climbing to 5g these days.  Seems like transmuting essences should be worth a little more, considering they're tougher to get, and prolly aren't sold as often (just got my first one ... haven't sold that ability yet).
I would go so far to say that Arcanite Xmute's are becoming out of date compared to other Xmute's. It takes a 2 day timer on your stone, and you can get roughly 4-5g for doing it.
On my server Essence of Water sells for about 2-3g and Essence of Air for 10-15g. The profit there is enormous if you consider making a few alts, grinding them to 58-60 using just rested xp, and have them pick up alchemy for this transmute. You could (if you had 4 60's which isn't hard to do) make a potential of, at least on my server (Illidan), 40g a day! That's not bad just doing transmutes, and considering that Essence of Water isn't being sold much anymore while Essence of Air flys off the AH, there is a market for this.
I dunno, something around there is reasonable. Transmuting one thing takes away from an Alchemist's ability to Transmute another later, for up to a day or two.
Proodmoore had arcanite xmutes going for 2.5 to 3g for a long time.  Eventually the alchemists (like myself) just wised up.  The diffence in price on the AH for 1 Arcane Crystal + 1 Thorium Bar vs 1 Arcanite Bar was about 6g.  So we just started buying the reagents, using our spell, putting the Arcanite bar on the AH, making 6g in return and said scr*w off to people offereing 2.5g.  The prices equilibrated within a few weeks and now the xmutes go for about 4g, the same as the difference in price from the AH.  Oh well, no more arbitrage.
Done the quest, been talking to Magnus Frostwake every day for 2 weeks now but only thing good for me that i could buy is major mana recipe. Any idea of what the problem might be?
As i remember you can finish the Questline with one Scholo Run but you should have a group which will wait for you all the time you go in and out :-) You get the Quest just outside Scholo