FWP:
For background see S. R. Faruqi's choices. This verse is NOT one of his choices; mainly for the sake of completeness, I have added it myself. For more on Ghalib's unpublished verses, see the discussion in {4,8x}.
For more on sitting sar bah zaanuu , see {32,2}.
It's true that, as Zamin complains, the most obvious reading of the second line is indeed 'hand on the head, head on the knee of the despairing heart'. But the i.zaafat is a versatile construction, and I think we can rescue the line by deciding to take it not as 'he was A, with B of C', but rather as 'he was A, B, with/from C'. This latter reading is highlighted and made more inviting by the conspicuous progression of 'hand on head, head on knee'. It is comparable to the use of kushtah-e ta;Gaaful in {4,11x}. In that verse, the lover was 'slain by negligence'; in the present verse, he was thrown into a physical posture of misery by his despairing heart.
But even though we can rescue it, it's hard to make it very exciting. I've put it in mostly to make the original ghazal complete.
Asi:
Yesterday we saw Asad in a corner of the wine-house [Asi's text has mai-;xaanah] in such a condition that through sorrow and stupefaction his hand was on his head and his head was on his knee. This verse is a picture; no telling why it was stricken from the selection.
== Asi, p. 74