(I would posted all this in the bug report thread had I thought of it at the time.)
I think the above is supposed to happen. There are some dopplegangers on the level where enter, some upstairs and also some downstairs where the real leader of the Seven Suns is held. You also need to kill those and free him.
Although I didn't mention it, I did actually kill the doppelganger who is guarding/harassing the Seven Sun's guy the first time I entered the building. I talked to Jhasso (I believe that's the Sun's guy's name) after I had killed the doppelganger.
Sequence of events:
1) First time in Sun's bldg - we talk to the real merchant there who has suspicions about the other merchants. We go down to the basement and kill the doppelganger. Jhasso tells us that the merchants are doppelgangers.
2) We report back to Scar but do not have a reply option that says doppelgangers have infiltrated the Seven Sun's. Scar sends us back.
3) We pester the two merchants on the first level until they turn ganger and then we kill them. We then kill two more on the second floor.
4) We report back to Scar and tell him that... the doppelgangers are too much for us to handle.
Perhaps this is a glitch unrelated to FotD but it did not go the way that it is supposed to. I wonder what would have happened had I reported back to Scar after we had killed the two on the first level but before we had gone up to the second floor.