Tom's watch is possibly what's known as "negative set", meaning that the keyless work is naturally in the setting position; pushing the stem into the movement shifts the mechanism to the winding position and pulling it out allows a spring to shift it into the setting position. The winding crown and stem are part of the case, when the movement is out of the case it will be in setting mode. And then the watch may not be this type, Waltham used both, later watches were negative set. I sometimes carry a Waltham silver hunter with an inscription from 1883 on the case, this watch in not negative set - the stem is part of the movement and must be removed before removing the watch from the case.
Originally Posted by Aron
Either way the watch needs servicing and should not be used.