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This thread is resolved. Here is a description of the problem and solution.
Problem: Slug for a custom post type is translated, however in the front-end the links are still leading to the other (non translated) slug / or the page produces error 404.
Solution: It is always a good idea, first to delete the old slug from WPML -> String Translation. Then you can always go to WPML -> Translation Management -> Multilingual Content Setup -> Custom Posts - and re-translate your slug for the custom post type that you want to have translated.