I like to treat headmasters as just being extensions of the larger body, so this will just be an extension of Ultra Magnus who was created to take the place of Emissary and control/commander Fortess Maximus. Best way to be the city commander is to he the city itself.
I find this element of the Prime Wars story line fairly interesting. The idea that certain Transformers can put themselves in a smaller body, to concentrate/distill their powers is pretty neat. When it comes to the figures, I treat the Legends figures as having Transtectors, and the Titans Return figures as being like the rebirth characters that way I can justify double dipping.
I thought we were supposed to use it on either the Leader PMOP or the Leader PMOP recolor as Magnus Prime in the Seige box set since especially the later is described in the bio as being the city commander.
You can use it for whatever you want. Despite Magnus Prime technically being Ultra Magnus, this Titanmaster wasn't specifically designed for it. Actually, a lot of evidence tends to suggest that there where going to he two more boxsets, the Intelligence set containing Ultra Magnus, and the Firepower set containing Scorpanok. So they are unrelated.