Of these two variants the second works.
The first gives as error an old enemy: the \Umathquad error

% gives an error:
\startsetups[test]
$\displaystyle
a=1
$
\stopsetups
\setup[test]
\stoptext

% works:
\starttext
$$\displaylines{a=1\cr b+c+d=3\cr}$$
\stoptext

ConTeXt  ver: 2012.01.16 18:33 MKIV
! Math error: parameter \Umathquad\displaystyle is not set.
\8>:test #1->$\displaystyle a=1$

Why this error?

Hans van der Meer