I still say we also arrange a rescue of the hostages, preferably when we "arrest" the wool merchant
The guards of the hostages probably don't deal directly with the Count--possibly the details of the mission aren't even known by the Count--and the hostages can only implicate the wool merchant, so grabbing the wool merchant means the hostages are safely in limbo, and the order won't be passed to kill them. Once we have the wool merchant, the Count won't care about anything but getting him back.
How's this then:
Arrange for the rat to send a man downstream of Folesden and wait. First thing we do to the wool merchant after he's aboard the ship and outside of the harbor, get him to tell us where the captives are. Make clear we have enough evidence on him, and the game's over, so cooperation gets him more leniency. The way things are, we could threaten to put him back on shore and take all this evidence to the Duke alone. That'll get the merchant thinking about his loyalties, and what the Count would do to rid himself of incrimination. If that's not enough, slice off a pinky and tell him we're done being nice to scum like him.
Information obtained, stick it to an arrow and shoot it at the designated rendezvous, the Rat's thugs liberate the captives while everyone in Folesden is panicking about our escape.
We need to find out if the wool merchant ever travels up our neck of the river to trade with the folks upstream. If he does, we could just intercept his boat and arrest him while he's on our land. Hold trial and execute him ourselves. If the count tried to intervene, it would be another point linking him to the attempted assassinations, and it would be a clear violation of our feudal rights!
Never thought of that. I assumed he was a burger who lived in the city and met with travelling merchants, but yeah, maybe he also travels to coordinate with his suppliers in the countryside. Maybe not to our lands, but anywhere outside the city is better than inside! We'll let the Rat determine the details of getting him close to us, then. Definitely don't execute him, though. This guy will turn. He'll sing.