Well, you're iterating over the PathToConfigs collection rather than the group of configs.
Use MsBuild properties when referring to a single item, and use MsBuild items when referring to a collection. Lets first change the path variables to properties rather than items.
<PropertyGroup>
<PathToConfigs>Configurations\EnvironmentDependent</PathToConfigs>
<TransformLocation>$(ConfigLocation)\OutputConfigs</TransformLocation>
<Destination>$(PathToConfigs)\TransformationFiles</Destination>
</PropertyGroup>
Next, since we know the transform and output files are based on the structure of the members of the FilesToTransform item group, lets infer those values in the metadata. First create a group comprising the config files, then construct the FilesToTransform using metadata from the @(Configs) group:
<ItemGroup>
<Configs Include="$(PathToConfigs)\*.config" />
<FilesToTransform Include="@(Configs)">
<Transform>$(TransformLocation)\%(FileName)%(Extension)</Transform>
<OutputFile>$(Destination)\%(FileName)%(Extension)</OutputFile>
</FilesToTransform>
</ItemGroup>
Finally, confirm your output in a message task:
<Message Importance="High" Text=" Source @(FilesToTransform ->'%(Identity)')" />
<Message Importance="High" Text=" Destination @(FilesToTransform -> '%(OutputFile)')" />
<Message Importance="High" Text=" Transform @(FilesToTransform -> '%(Transform)')" />