Bolty's Note: Jarulf had been hinting for a while that, after the release of version 1.04, there were new cube recipes, including one which featured the generation of rare items.  Being aloof, he decided to let someone else discover something this time.  :)  Teske came through days later:

Horadric Cube Rare Axe + 6 Perfect Skulls.  That's all you need. I tested 4 skulls + rare axe, and got no result. It might be possible to use non perfect skulls or only 5. I tested other gems, but so far no result, maybe you need 6 of the same type.

Test it, post your results, and give me all the skulls you have.

Ok tested:
Rare Ornate Plate + 6 perfect skulls= Rare Ornate Plate
Rare Sword+ 6 perfect skulls = socketed
Rare Ornate + 5 perfect skulls= doesn't work
Rare Ornate + 6 rubies = doesn't work

Even more testing. (Yeah it's almost X-Mas)

Rare Ornate + 6 chipped skulls, one flawless skull. (Upgrades to gem of higher quality.)
Rare Ornate + 6 Diamonds = doesn't work
Rare Ornate + 6 sapphire (blue) doesn't work.