This is a sort of a new/old hazard and status effect. Freeze fire is similar to shadow fire except it causes freeze instead and is blue. Frost burn is actually a combination of 2 statuses. It is still a cold status but when inflicted, the person who has it will be covered in blue fire and take periodic damage just like the fire status. The second effect of it slows down the person just like stun. Basically about frost burn, the person inflicted is not immobile because there is no ice and can still move while taking cold fire damage and moves slowly. Only cold resistance will affect this status and not fire or stun.
Places I think that this will fit in are areas that are cold undead/fiend. This seems like an otherworldly thing of dark powers.
As someone who believes that Freeze Grates and getting Ice-locked by something like a Lumber are the most lethal thing in Spiral Knights, I'm going to have to say -1 to more Freeze damage.