Are we able to change the asset account of an item if there are transactions already posted for the items? I'm assuming no... therefore what's the alternative other than recreating the item or reopening closed periods to update the transactions?

Yes you can now and change will not apply retroactively.

Change will apply retroactively on transactions made in periods that are open.

this is the message I'm getting... does that mean it will update all transactions regardless of whether the period is open or not?

All transactions in open periods are changed.