Yep, i've had what sounds like the exact same thing. Had a recurring dislocation of my extensor carpi ulnaris due to a torn sheath.

In my opinion, these kind of injuries won't heal by themselves. If the tendon is repeatedly popping out of the sheath, it's disrupting any potential healing of the sheath every time it happens. Some of the conservative treatment in the literature recommends immobilising the wrist by casting for 6-8 weeks in order to allow healing to occur. However other reports state that there's a risk that if the tendon has broken through the sheath, that when it has returned to it's normal place, it may actually be sitting on top of the sheath and not underneath it. Thus the recommendation for surgery.

I had surgery - they used part of the extensor retinaculum to help hold the tendon in place. After 4 weeks in a long arm cast, i got switched to a sugar tong splint - it prevents rotation at the wrist, but it can be taken on and off so you can do range of motion at your other joints.

This was about 3 or 4 years ago, and since then i haven't had any problems - back doing sports, weightlifting, gymnastics.

And i agree - you definitely need to see a hand specialist for these types of injuries.