The Unicorn Weisswurst used to be edible in the past with no effect when Orcsoberfest first came out. However since near the 2nd Orcsoberfest, it has been updated to which now has an effect when used.
I bought this item for 2,000 festive points. I don't recommend getting this item, it's boring. If the Unicorn Weisswurst is in your inventory and you use it, it gives the user a melee effect when used and says, "Weisswurst is awesome!" If the Unicorn Weisswurst is on the floor and you use it, it will give a melee effect on the Unicorn Weisswurst and it will tell the user "Weisswurst is awesome!" So you can use it in your inventory or on the floor.
No, this item is not apart of the festive outfits from what we're aware of according to this TibiaQA question and answer: https://www.tibiaqa.com/7215/what-i-need-to-do-to-gain-outfit-from-orcsoberfest-festive?show=7215#q7215
....The lederhosen you gain when you defeat King Chuck are the first part of the outfit. You can gain the next item when Orcsoberfest takes place again in March next year, defeating King Chuck then once more will unlock the base outfit. Subsequent instances of the event will lead to further items and thus addons for the outfit.
The unicorn weisswurst can no longer be eaten and provides a small graphical effect instead when used.