I'll give it a go Loogie. It sounds like you are looking for a frontier city that has a sinister/intrigue element. The plot that your pc is involved in, sounds great (not for him of course). Plenty of opportunities for betrayal, and holy cow--I never saw that coming moments.
Obviously, most of the atmosphere is going to be created by you, the dm and your npcs, but here are a few thoughts on how the city can back up your campaign's theme. First, the fort. Although having it made of black stone with bodies impaled on it would be a dead giveaway, try giving it a severe, monumentalist look. The merchant and those in the know serve the Hells/Abyss (or whatever they are called in your game), so the architecture of the places they inhabit should have a subtle infernal influence--use of black and red, severe lines, towers with sharp pointy things on the top, etc. Don't overdo it, but a viewer should be subtly discomfited looking at the fort.
Second, law. It sounds like whatever dark power the merchant serves is more lawful evil than chaotic evil (maybe not, it seems that way from your description), so the city that he's a power in should have a strong police/military presence with possibly checkpoints and an execution/stocks area for those who dare break the rules (and one that gets frequently used--that pc might not have noticed it at first, but on second look the city should seem to go overboard on punishment).
A third thought is tone. Although the city is on the frontier, the undercurrent of evil in it could manifest as the city being a magnet for kooks, charlatans, and whackos. There could be licensed brothels and gambling dens that on first brush serve to let off the miners and workers steam, but on a closer look serve to trap them in a cycle of debt. Above all, normally frontier towns, while rough, have a hopeful element to them as people seek to reinvent themselves. Yours, while having that, should have it prove to be a false note as the mask of the city comes off and it serves as more of a trap for those unfortunate enough to enter it.
Given that your city is on the frontier, there should be multiple strongpoints around it and at a minimum, a wooden spiked log parapet, if not an outright wall around it. Depending upon its wealth and size, you may want to have internal walls as well--used by the ruling elite to control and regiment the populace. Only the buildings of the wealthy would be made of stone, with most structures made of wood, packed earth, and straw. Given the brutality of the winters, the structures would probably have a claustrophobic feel on the inside--as the builders try and maximize the area that can be heated without having it be so large that the inside gets drafty.
One subtle thing you can do to emphasize the law aspect of the city is make sure that the roads follow some type of grid. Most older European cities had a crazyquilt patchwork of roads that followed old trails and land features and could have a curving mazelike quality to them. In antiquity, only authoritarian societies with strong governments, such as Rome, built cities on a regimented grid pattern, so giving your city a grid pattern might be a subtle hint that some dictatorial organizing force is at work.
Another idea is that you've indicated that there is quite a bit of things going on underneath the surface. You've meant it so far in a figurative sense (what your pc thinks is going on and what is really going on vastly diverge), why not make it literally true? If the merchant and the evil cult he belongs to have so many nefarious schemes going on, it would make sense they would have a tunnel network to warehouses, safehouses, hidden temples etc. so that they can do their business without being seen. Create a web of hidden tunnels that all lead back to the fort.
I hope you find a thing or two in all the above Loogie that is of some use. Your campaign has an excellent premise, I'm curious to see how your city turns out.