Then, as a way to say 'thank you', the only new thing would be the Gondians and Ironhands jointly, the best metalworking gnomes on the planet, have the knowhow to take Dammon's work to the next level and fix Karlach's heart permanently. So not creating any new game scenarios. Just adding a layer of reward on a very deeply threaded set of side quests Act 1 to Act 3 which at any point if the player messes up, become undoable.
I'm not sure about the DND lore, if the local gnomes can do something like that, it seems to be more related to the Tieflings.
Anyway, thanks to your reasoning on how it could be implemented, another thought occurred to me. A contract with Raphael. It would even have the amusing irony that to appease/get rid of the devil's Karlach engine you have to make a deal with the devil. And then just steal the deal from the House of Hope as in the case of the Hammer. Just seriously what kind of sense, interest, motivation should a player have to pay attention to Orpheus Hammer at all? Much less trying to get it through a deal with the devil..... That's pretty stupid, if you ask me. We only find out about this hammer at the beginning of Act 3 (if I'm not mistaken) and all we need it for is to free Orpheus (not counting Hope, but we may not find out about it at all if we don't go into the house, so that's another reason why there is no initial motivation), but why should we free Orpheus if everything is fine? We are protected from Absolute's influence, the larva gives us abilities, Mind Flayer wants to help us and doesn't want to harm or threaten us in any way (of course he acts in his own interests, but those interests are similar to ours). And if we've already met Ansur by then, and we find out who Mind Flayer really is, there's even less reason to kill him or oppose him in any way. The whole game we're given no doubts or warnings about our mind flayer, except at the beginning, and that's more like: "Oh my god I've got some kind of worm in my head I need to get it out of there right away", rather than being just a kick start to the whole plot of the game. But over time, as the game progresses, you realize that the larva is only useful as long as the Mind Flayer in the prism protects it from Absolute's influence, and you will have no desire to get rid of it to make this protection disappear.
There's a lot more to write on this topic, but it won't be about Karlach directly, but about the fact that Daisy on Balduran was a stupid mistake, because Daisy would have been the very motivator to get rid of the maggot, to question the credibility of her and her abilities (as it was in EA).
But what I'm getting at is that the player would be more motivated and willing to help Karlach, a character he's grown fond of and sympathetic to (f*ck, I just love her "oh hi Mark!" iykyk), than to get the Hammer he doesn't understand why he needs it, and for that he'd be willing to make a deal with the devil.
Seriously, I just don't understand who would make a deal with the devil for the Hammer, unless it's for the sake of lae'zel's plot (which as a character I personally never liked to be honest) or just for the sake of interest in what will come out of it, because by that point it's clear that the main storyline can't change critically from that, so why not? It's just that for all my two careful playthroughs of the game, this very game personally did not give me a clear motivation and justification for getting rid of the maggot, but just the opposite. (actually for me it's very frustrating, I wish Daisy had stayed, it would have been much more interesting to fight with mental torment like Dark Urge than to just realize that the maggot is good, and the story as a whole would have looked more logical and coherent).
