I've got this crap figured out. Pack it up boys, we're done here.
Well... Not really. xP I think I have a pretty good theory though. Here goes:
Badger put Faith's head on the steps, check out my "Badger" thread for an explanation of why I think this. Faith is probably not dead, since, as we know, Snow can't be dead. I suppose we could be dealing with a sloppy "sometimes serial killer" here, but I'm going to bet on consistency. There's a pair of lips on Faith's ribbon (I recommend replaying the beginning of the game or watching a Let's Play to see them. They're clearly visible if you look closely enough) and I think this is what's keeping Faith from answering Bigby's questions, and Mirror from showing Faith's location. This would explain why when asked their respective questions they both respond with the phrase "These lips are sealed."
Screw how paragraphs work, I'm splitting this crap here to reduce the wall of text. Anyway, Badger put Faith's head there to frame Bigby, but not entirely of his own accord. He's been promised a better life in Fabletown and away from The Farm by our true villain, who plans to take over Fabletown after incriminating Bigby and manipulating Crane. How is this villain going to incriminate Bigby you ask? Easy! Anyone can frame someone if they have enough information on them. That's where the Boy who Cried Wolf comes in! He may have been promised a better life as well, but I doubt he would need much extra incentive to get back at Bigby.
That's essentially my theory. There's still a lot that it doesn't cover, but I think that this is the basic arch that the story will take: Villain stages murders using Fabletown's under-class by promising them a better life, frames Bigby using the help of some of Bigby's already established enemies, attempts to take over Fabletown, ???, crap hits the fan.
Feel free to let me know what you think. I'm most likely completely wrong, but speculating is still fun. ^_^