This article says we do find out the identity of the Magic Man in Ep 8. http://popwatch.ew.com/2010/05/12/happy-town-pulled-abc/
"When news broke yesterday that ABC would be pulling Happy Town after tonight’s episode for the rest of May Sweeps — the show is scheduled to return June 2, with the first of five remaining episodes — I wasn’t surprised. Ratings aside, I’d seen the first two episodes and had no idea what was happening on the show. When I told that to star Geoff Stults (newly-appointed sheriff Tommy Conroy) before the drama’s premiere, he said that was the proper response: “It’s not CSI, where at the end of the episode, you’re like, ‘Oh, that was the killer.’ That’s not what we’re going for. We want people to be along for the ride.” He said the writers had thought about how to create a slow-build mystery that still gives people enough to get them invested so they keep coming back. That’s why starting with tonight’s third episode, we’d be given “mini resolutions to things" in each hour — culminating in the identity of the Magic Man in episode 8."