Tidir gave me the scrap of red cloth and told me of the three people in the Bridge District that buried him. I battled 4 people in a warehouse by the docks in the Bridge District (not the skinner quest). Was this them? I think one had on a red garb. Am I supposed to do something to finalize quest or is this "red-garbed person" someone/somewhere else?

Don't think so. As far as I can tell the only way to finish this quest is to talk to the old bum undertaker, interrogate him, then go to the southern part of the bridge. There's a guy in bright red there, you can't miss him. Talk to him and he'll flee into a house that would have previously been locked. Inside there'll be a couple of blokes; they'll kill him and scarper. Follow them, kill them before they get away, and then go up and either release the woman, or keep the ransom going. I'd recommend releasing her, all you get from ransoming her is a pair of bloody pants. No kidding.