Don't know if you've completed it by now, but here goes anyway. Timmy is supposed to be sitting on a bench in the northern part of town in the merchant's circle. However, I had to reload 3 or 4 times before he finally appeard. Otherwise, I would always fail because he magically was not there.
This game is infamously buggy. Save often because I've run across TONS of bugs and some have the potential to mess up your game if you don't have previous saves to backtrack to. --- Useless Fact of the Day: There are more chickens than people in the world.