[/i][i] To obtain permission to arrest her(I assume you meant Baroness Linda von Gallagan), you need two pieces of proof against her since she is a noblewoman.

The first proof is the witness statement from Bishop Quentinus that she was with the heretics who stole the corpse.

The second proof is the witness statement from the soldier Millward that he saw her climbing out of the window of the inn on the night of the murder. The soldier can be found at the ground floor of the inn. You need to speak to the beggar beforehand and pay his price to get to know that the person leaving the murder scene met with the soldier.

I've done every required to get Linda arrestable, including talking to Millward, but I too can't get the option to arrest her. Anyone found a way around this one yet?

Check your proofs journal. Does it list the testimony by Millward that Linda was seen climbing out of the window of the merchant's inn room and the testimony by Bishop Quentinus that Linda was seen stealing the corpse of the deceased baroness in the cemetery?

If your already done the quest and passed the test to become an Inquisitor you don't seem to need to ask permission to arrest her. At least that's the way it worked for me I was stuck like this as well until I just went to talk to her and noticed I could just arrest her.
I'm playing as a priest.