Mertwyn the Headless can be found wandering in the entry area at the Civic Festhall. This is actually just Mertwyn's mechanical body. You can find his head in a Steel Box in the possession of some Clerk's Ward thugs. You'll find them to the south, outside the Linguist's home. You can try to buy it, engage them in competition for it or fight for it. If you choose to fight, kill them (they're small potatoes compared to thugs in the Hive), but take time to enjoy the exchange between Annah and their leader. The Box is among their loot items. Take Mertwyn's head back to his body and he will be grateful.