Yes. Apparently you keep the orange item.
There's just a really high % chance that you get to keep the orange when you fail the yellow(of course, there's some people with horrible enough luck to fail yellow twice in a row and not get the orange back either time).
Also, cool story bro.
I had mine made 8~ hours after mainta and +8'd it off of B scrolls with 60~ dura left(no mallets).
Of course, all +9 attempts have ended in failure.