Had 1 spawn right outside the castle for me right before the "garg tunnel" towards the kobald camp. I can confirm they can spawn outside, not just in the 4 room past Velk.
Had 2 spawns of him today when I was soloing in and around Velk's castle with my Monk and cleric merc. He was in the same spot both times. The best way I can explain it is that he was outside of the castle. When you run through kobold camp and come out past those 4 gargs into the back courtyard area of the castle, the mob was directly to the right past a lone garg and spawned next to a golem. He wasn't much harder than any of the other crystal golems and was no problem for my 64 monk + cleric merc. He spawned AGAIN in the same exact location the next time I came around later on while I was still soloing.
This guy can spawn in place of any of the golems in and around the outside of the castle-area.. just got him to pop after about 2 hours of clearing the outside spawns..
Sees invis, Summons, Ramps alot... Max hit on me, 75 Druid, was 159..
Pulled him with Nature's Blazing Wrath and dropped a couple extra DoTs on him.. DS did most of the work.
Doesn't seem much more difficult than most of the mobs you have to kill while clearing.. has around the same HP's I'd say..
Was able to get this to spawn after approximately 10 clearings of the room past Velk's throne.
Others have commented that this would only spawn while Velk was up but I can say that this is incorrect. We killed Velk last night while waiting for repops and he was still down when I came back tonight to camp it again.
If you find Velk's room (in the basement of the castle), pass it and continue up the stairs. At the end of the stairs is another door that opens into a room with 6 mobs. 4 mobs on ground floor and 2 mobs on a higher platform.
On my 8th clearing of the room (just under 3 hrs) , Velk's Experiment spawned underneath the platform.