After long and serious thought on the head's identity, I think I finally have it. Here we go...
Remember the journal entry right before level four, where the writer says "...but the truth is even stranger than the rumors. Apperantly, the Nine dug up the head of one of Balor's old enemies, and started talking to the thing..." This comment alone means that whoever the Head is, it must be a very powerful sorcerer, and it must be very old, but not to old, or it wouldn't have a score to settle with Shiver. Even assuming that Shiver is the oldest of the Fallen Lords, this still limits her age, and therefore the Head's age, to about 1,000 ("...some of the Fallen are nearly a thousand years old, and have rivalries that go back just as far...") Now, this limits the number of possibilities drastically. But the final key comes from Alric's rescue, when Alric is ridiculing the belief that the Head was one of Connacht's lieutenats who had fallen to balor when he first emerged. From all the different clues, all we know is that Balor is really Connacht, and that the head fell to Balor/Connacht many centuries ago. There is only one person ever mentioned who fits this description, and that is the Leveller's previous incarnation of Moagim Reborn. In addition, Moagim Reborn was supposedly torn to pieces in front of the city of Muirthemne, which is where the Head was recovered from.
This would explain why the Head sought to play the Light and the Dark off against one another--it had a score to settle with Balor, but it was still an entity of the Dark, and so certainly didn't want the Light to win. And, of course, the leader of the race of Myrkridia would have to be an extremely powerful sorcerer in his own right--powerful enough, say, to survive six hundred years of having his head detached from the rest of his body.
