Double check to make sure that you have re-hired all of your 1.0 Legacy Retainers. I had this issue for a bit on Saturday moring transfering my Legacy character. It turned out that I had a 2nd old 1.0 Retainer that I never re-hired on my Legacy server. So, since your retainers can hold items, SE ensures that no items are left behind by forcing you to re-hire all of your Legacy Retainers, before you can initiate a Server Transfer.

Think of it as no Legacy Retainers and items left behind policy.