I managed to capture Mandalf and imprison him, only for him to appear later outside of the Prison as if nothing happened. As far as I can see it is the intended course of actions, but it left the Prison thinking it still holds him.
So I gave this a try last week. Unfortunately I wasn't able to get it right at the cusp of the first Mandalf spawn as ZzZombo has.
I tried with the Second and Third Mandalf spawns but the problem didn't seem to occur with them, so I have a sneaking suspicion this is only an issue that occurs on the first spawn. I'm going to pass this on to Code to see if there's any circumstance where this could occur with the first Mandalf Spawn.
It's tricky to reproduce. The first time I found it out was when the level glitched. Instead of a few seconds to disappear and then reappear at the Gateway, Mandalf took much more, allowing me to capture him w/o doing anything out of ordinary. So now I had to kill and imprison him as fast as possible. Here is the savegame where all conditions are met to reproduce: Savegame.7z.
Did you use my savegame though? If you do, you'll only need to do last few steps.