I downloaded the DLC but I don't see a new merchant anywhere. Does it just update the equipment other merchants already have?

For me, in Flotsam he is down by the waterfront.

It adds a new merchant in chapters 1 and 2, though I forgot exactly where.

Edit: in chapter 2 roche, he's on the bench close to the ruined tower near the brothel tents.

No, the mysterious merchant should be at Flotsam Harbor right hand side if you come from Flotsam to the boats in Act 1.

In Act 2 on Roche's side you can find him at the top of a hill in the whore's camp.

Btw, the mysterious merchant is awesome :)

And on Ioverth's side in Chapter 2 the Mysterious Merchant is standing just above the pit in front of the Tavern.

Sweet. Thanks a lot for the help guys.

I found him by mousing over the merchant symbols on the map.