My theory so far. CONTAINS SPOILERS
EDIT!: I completely forgot about the mirror saying the phrase "These lips are sealed." My explanations for this can be found after the whole final theory.
So, this is the way my brain has been working so far.
The ones who I strongly think are not the murderer:
The Woodsman.
The Woodsman may have been involved with all of this somehow, but seeing as how he has been behaving so far I doubt it was him. Although he could have murdered Lilly, for reasons I will explain after, I do not think that he is the murderer. If you chose on episode 1 to pursue the Woodsman in the bar, in Episode 2 he is the one you interrogate. If you interrogate him well enough, thanks to Bluebeard, he tells you that Faith wasn't actually meant to go to his place that night, but Lilly was. Why would have Faith gone instead? I think Lilly went to see this "Mr Smith", seeing as he would probably have paid a higher price. So while Lilly and "Mr Smith" were doing all that Snow White recreation scene, Bigby and 'Woody' were having that fight. After Faith puts his axe through his head, and leaves, Woody could have gone over to the strip club and asked if Lilly had a client. While that was happening, "Mr Smith" and Lilly were probably getting to the final scene of the act. Woody then could have gotten himself into the room somehow, and murdered Lilly. But this theory lacks on a lot of evidence backing it up, so I don't think Woody did it.
Dee and/or Dum
These two guys I dont think are the murderer/s, but work for it. I definetly dont think, and some people may agree on this, that they are smart enough. I do however strongly believe they work for the murderer. Dee(who could actually have been Dum, impersonating his brother) refused to say anything to Bigby, and attempted to avoid him as much as possible. He could have been sent to Faith's place to eliminate all evidence that could have been there, or to as a matter of fact kill her husband, Lawrence. But not quite, seeing as he could have commited suicide. Dum hasn't been seen a lot, so I think that rules him out, but I think he was the one at the Woodsmans place, seeing as what the conversation with Toad was. However it could have been him and another person, or another person glamoured as him. The possibillities are endless. In the preview of episode 3, one of the brothers is shown pointing a shotgun at Bigby. Why? Obviously someone wants him dead. The murderer? Who knows.
The ones I think could be the murderer:
Crane:
I personally do not think he is the murderer, but he could. Lets start from the beginning of something, in Episode 2, Beauty confesses to Bigby that she owns Dee and Dum money. That money she owns could have been for their boss. Their boss could have been the murderer. Crane of course could have hired them for himself, and it actually kind of makes sense, but I think something else, which I will put down in my final theory. Crane then controls all of Fabletown and the black market, making him extremely powerful. And if so, he would be able to do whatever he pleases. But this doesn't match up to Crane's personallity. So, why could Crane be the murderer? I honestly have no comments on him just now, but the way things have been going he could be the murderer.
My final theory:
THERE IS NO MURDERER. It's a really simple fact. The game isn't about a loose murderer. Thats what the game wants you to think. There is only a big mastermind behind all the ocurrences in Fabletown that imply that there is one. All the people who have been killed were prostitutes. All of these prostitutes have a ribbon around their neck, and whenever asked for an explanation reply with "These lips are sealed." The reason for this is no matter how hard they try, they will reply that because there is a spell on the ribbons. That spell forces them to not say a word about the whole industry. But why dont the other people who work there have one? Because they dont actually know. Georgie probably knows he has a boss, who is the mastermind. That boss strictly says that every prostitute working there must have one on at all times. And if they attempt to say anything that might lead on to him being discovered, the ribbon would press so tight on their neck that it would make an almost clean cut similar to the one on Faith's and Lilly's head. One of those things being not able to say what the ribbon does, therefore covering the whole thing. So why didn't Lilly have a ribbon on her when she was found? Because she was dumped in the river. The ribbon must have been put underwater and lost, so the only way to recover it would be if TJ had caught it and kept it in secret. But who is this mastermind? You guys will probably think its the headless horseman, and while it is possible(and I strongly believe he could be the mastermind), right know it could be many people, like that ginger guy that randomly keeps appearing, Bluebeard, Crane or some other people. So, now to explain the whole Crane "incident". Crane hired Lilly for the higher price, so Faith had to go and replace her at Woody's place. Crane was either trying 1 of 2 things. He was either trying to persuade Lilly to tell him what the ribbons did, because he was investigating the case himself, or just simply trying to pleasure himself. But near the end of the whole thing, either the mastermind decided to not let him have his fun, to just kill her, or the ribbon simply malfunctioned because of the cheap glamour. Crane didn't want to be blamed for the whole murder thing, so he smashed the mirror therefore nothing could be traced back to him, also destroying one of the most helpful pieces of evidence they had without thinking, resigned and left in order to survive and hide himself from the mastermind, or to try and put a stop to this before it got any worse for him. But why did Faith die then? Either Faith could have told someone about he ribbons or something else that caused it, or some other unexplained reason. So, who would be the person who resents Crane the most? The Headless Horseman. He was jealous of Crane managing to get a good job and reputation, and must have some past history in Fabletown with him, therefore attempting to create chaos in fabletown and ruin all of it.
Of course, this is just my theory. Feel free to discuss all of this, and thanks for taking the time to read this! 
The mirror: I think the mirror could have been working with the mastermind or could have been under a spell(doubt it), or maybe the spell didnt permit anyone with the abillity to get the information without anyone else telling them to speak about it either. Anyone have any thoughts on this part?
Also a quick mention that when the ribbon slices the head off it could be put as murder seeing as the spell someone put on it caused it to do that. Thanks for that MrBubbles.
Comments
Wow. Did not give the ribbon much thought into it. But if there was a spell on the ribbon to keep the prostitute from talking other wise it will severed their head off. It still counts as murder since the one who place the spell would want them dead if they talk but don't want to get their hands dirty. I try to make sense of what is at hand now but still leave my mind open to what could still have happen in till more evidence comes to light. I look forward to what everyone else think about your theory SaulJoker
Thanks man. I guess you are sort of right there with the murder concept, but of course it wouldnt be for any other reason other than that I think.