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I defeated the lich in the lower tombs i couldnt find the nether scroll in his remains or tomb when edwin spoke i told him that the treasure was all his, when will he try to use it and turn into a woman or is it after you complete a certain quest or enter a certain area or did i answer wrongly or did i just never pick it up as i never saw it in my inventory, also are there any benefits of it apart from the funny dialogues,, thanks

He uses it in a few days. Don't worry, you don't actually see it, in about three days he'll say he's translated a bit of it, then in another couple of days he'll says he's got it and be transformed. Edwin gets some experience benefits from it.

By the way, how does one turn him/her back?

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We call him Bobby Corwen
http://www.finalfantasy.nu/forum/minichoco.gif

Eventually some people looking for Edwin come up to you, you can cover for Edwin or reveal him. If you cover for him, they will come back a couple fo days later and dispel the magic and attack him.