@Leftover_Pizza

Thanks for the info, that's good to know. In my case, I had not tried to claim The Godly Reward gift prior to having my gear removed and scrapped. I'll load my game while connected to Xbox live again and see if it scraps my gear or not. If it does scrap my gear again, which I assume it will, I'll see if I can claim the reward or not.

Success!
I reconnected to Xbox Live
Loaded my most recent manual game save
The game showed my refund in materials for the Modraniht Ceremonial set (11T, 11N, 2060Leather, etc.) - which makes sense for the materials if the gear was fully upgraded.
I verified the gear was not in my inventory.
I claimed The Godly Reward pack successfully from the Animus store.
With the gear being automatically broken down, you should not receive the error for having too many of a certain item. If the gear is still in your inventory I do not believe you will be able to claim The Godly Rewards pack.
Try saving, closing the game, relaunch the game, load your desired save, wait for confirmation of material refund, check your inventory to see if the Ceremonial set is present or not, open the Animus store, "Buy" The Godly Reward pack. If this does not work, you may be of the unfortunate few who have experienced having random gear/sets duplicate within your inventory. If any of those set pieces are present (this may also include decorations from the Yule/Jule event) then you may not be able to successfully "Buy" The Godly Rewards pack.

@Ubi-Borealis
There had to have been a better way for Ubisoft to go about this - maybe just coding The Godly Reward pack to recognize duplicates and only grant the items which the player didn't already have unlocked. Maybe a heads-up in-game so people don't panic when the loot they worked towards randomly disappears.
If you're hiring, my expertise is available

+1

I loaded the game this morning to check out the update and everything seemed to be working just fine. I did my Reda quests, purchased an item from his shop, and started tinkering with the new transmog system. After updating the appearance on a few pieces of gear, I saved, closed my game, and signed off. When I later opened the game and selected "Continue", I noticed a few pop-ups for materials gained as soon as I loaded in (tungsten, nickle, copper, titanium, ore, and leather). Upon further review of my inventory, I noticed that my Yule/Jule set (Modraniht Ceremonial set) was missing - weapon, shield, and all armor pieces. I also noticed that my berserker set had once again reverted to the base, non-upgraded version of itself. I tried loading auto-saves from earlier in the day, however, they all resulted in the same result outcome; gear gone, materials gained. The other manual save I tried to load (from Jan/9/2021) also yielded the same result upon loading. The only way I was able to get the gear back in my inventory was to close the game, disconnect from Xbox live, open the game, and load a manual save created prior to receiving the material "refunds". This is not a permanent fix, as every time I reconnect to Xbox live my Modraniht Ceremonial set is removed from my inventory and I receive a material refund. This means, I can either keep my unique fully upgraded set and play offline; forgoing Reda interactions, gear, and other online-only features, or I can utilize the online features at the sacrifice of my unique, fully upgraded gear. Please fix this issue. A decent amount of time and materials were put into acquiring and upgrading those event-sensitive set pieces.

@Leftover_Pizza

Thanks for the info, that's good to know. In my case, I had not tried to claim The Godly Reward gift prior to having my gear removed and scrapped. I'll load my game while connected to Xbox live again and see if it scraps my gear or not. If it does scrap my gear again, which I assume it will, I'll see if I can claim the reward or not.

Success!
I reconnected to Xbox Live
Loaded my most recent manual game save
The game showed my refund in materials for the Modraniht Ceremonial set (11T, 11N, 2060Leather, etc.) - which makes sense for the materials if the gear was fully upgraded.
I verified the gear was not in my inventory.
I claimed The Godly Reward pack successfully from the Animus store.
With the gear being automatically broken down, you should not receive the error for having too many of a certain item. If the gear is still in your inventory I do not believe you will be able to claim The Godly Rewards pack.
Try saving, closing the game, relaunch the game, load your desired save, wait for confirmation of material refund, check your inventory to see if the Ceremonial set is present or not, open the Animus store, "Buy" The Godly Reward pack. If this does not work, you may be of the unfortunate few who have experienced having random gear/sets duplicate within your inventory. If any of those set pieces are present (this may also include decorations from the Yule/Jule event) then you may not be able to successfully "Buy" The Godly Rewards pack.

@Ubi-Borealis
There had to have been a better way for Ubisoft to go about this - maybe just coding The Godly Reward pack to recognize duplicates and only grant the items which the player didn't already have unlocked. Maybe a heads-up in-game so people don't panic when the loot they worked towards randomly disappears.
If you're hiring, my expertise is available

@Leftover_Pizza

Thanks for the info, that's good to know. In my case, I had not tried to claim The Godly Reward gift prior to having my gear removed and scrapped. I'll load my game while connected to Xbox live again and see if it scraps my gear or not. If it does scrap my gear again, which I assume it will, I'll see if I can claim the reward or not.

@ubi-borealis

I would also like to answer your questions directed to TookieJones, as we may have slightly different outcomes/experiences, or be on different platforms.

I am on Xbox Series X with everything currently up-to-date.

I am not able to find the gear in my inventory on previous saves while connected to Xbox live. The gear was in my inventory pre-update and even post-update prior to saving and closing. Upon reopening and loading any saves while connected to Xbox live the gear is automatically dismantled and I receive the material refund for the Ceremonial set. If I disconnect from Xbox live, it is in my inventory in all save instances, including post-update manual save made today.

Prior activities:
Reda interactions (quests obtained, gear purchased with opal, daily quests completed).
Jomsviking interactions (the one on the Ravensthorpe dock was missing so I checked out the ones in my Jomsviking hall (river raids DLC) to see if I could find any friends).
Gunnar interactions (upgraded some gear, transmog'd a hunter bow, disengaged, inspected inventory/gear, talked to Gunnar again, transmog'd chest armor and cloak, disengaged)
Manually saved with overwright to most recent manual save.
Closed game via Xbox menu then powered off console.

Powered on console, opened game, hit A, hit Continue - Noted loss of gear and gain of materials
Tried loading earlier autosaves and manual saves - same outcome as above
Closed game, disconnected from Xbox live
Opened game, loaded manual save from today but post-update - gear is present in the inventory and fully upgraded

+1

I loaded the game this morning to check out the update and everything seemed to be working just fine. I did my Reda quests, purchased an item from his shop, and started tinkering with the new transmog system. After updating the appearance on a few pieces of gear, I saved, closed my game, and signed off. When I later opened the game and selected "Continue", I noticed a few pop-ups for materials gained as soon as I loaded in (tungsten, nickle, copper, titanium, ore, and leather). Upon further review of my inventory, I noticed that my Yule/Jule set (Modraniht Ceremonial set) was missing - weapon, shield, and all armor pieces. I also noticed that my berserker set had once again reverted to the base, non-upgraded version of itself. I tried loading auto-saves from earlier in the day, however, they all resulted in the same result outcome; gear gone, materials gained. The other manual save I tried to load (from Jan/9/2021) also yielded the same result upon loading. The only way I was able to get the gear back in my inventory was to close the game, disconnect from Xbox live, open the game, and load a manual save created prior to receiving the material "refunds". This is not a permanent fix, as every time I reconnect to Xbox live my Modraniht Ceremonial set is removed from my inventory and I receive a material refund. This means, I can either keep my unique fully upgraded set and play offline; forgoing Reda interactions, gear, and other online-only features, or I can utilize the online features at the sacrifice of my unique, fully upgraded gear. Please fix this issue. A decent amount of time and materials were put into acquiring and upgrading those event-sensitive set pieces.