It might seem like the damage only scales well with physical based off that conversion, but actually that does not affect how much damage you can get with phys vs. ele.
The damage multiplier of the skill itself is what matters. In this case, 122% at level 20. No matter WHAT type of damage I get, it is all multiplied by that number. So say I have 1000 physical damage, I then deal 1220 damage (488 of that being cold damage, 732 phys). Now say I have 1000 fire damage, I would deal 1220 damage (all of it being fire; the cold conversion ignored). In each case, you deal the same amount.
As far as scaling the damage, Frost Blades itself does nothing apart from just having a high damage multiplier (122%). The actual damage scaling comes from all the same places you would get it, regardless of phys vs. ele - so support gems, auras, gear, passives, etc.