The Bone Saw is found in a room left of Agrippa in the Nave. When Daniel first enters this area, the aforementioned room in the Nave is inaccessible - being blocked by a wall. It is not until Daniel is captured by Grunts in the Chancel, held captive in a cell, escapes the cells area while running from The Shadow and ends up back at the Nave that this item becomes reachable. Upon returning here, the room with the Bone Saw is now accessible due to the blocked wall being destroyed by The Shadow.
Once the Bone Saw is collected, it can only be used to cut off Agrippa's head after he's fed Weyer's Tonic. If Daniel attempts to use the Saw on Agrippa before he's fed the tonic, he will say "Don't get ahead of yourself. First we need the tonic."