If you use other TeX distribution (TeXlive, MikTeX), you will have conflicts because your system doesn't know how to differentiate between your current TeX distro binaries, and Context's binaries, so, the system will use different (non-compatible) versions of a lot of things, and will use the first executables found in the PATH. I have both texlive and context, but configuring them to work well together, took me a while. I use a couple of custom .bat files to invoke context's path ONLY when I compile Context files, but use the defaults for textworks when I complile LaTeX files.
What I did was:
1. Your same steps 1-3.
2. Created a folder called C:/context/pragmatex/
3. Inside that folder I placed two files: PRAGMATEX.BAT and SETPATH.BAT (contents below)
4. Add C:\context\pragmatex\ to the PATH variable (so the two mentioned files can be found by the system)
5. Configure TeXworks:
5.1. Open TW and go to Edit > Preferences
5.2 Select "Compilation" tab
5.3 In that Window, in the field "Location of TeX and related programs" (or something like that, the name can be slightly different. I use the Spanish version), add (using the button marked "+") the folder C:\context\pragmatex\ 5.4 In the same window, below, select ConTeXt (LuaTeX), and click "edit".
5.5 In "Program" add "C:/context/pragmatex/pragmatex.bat" (without quotes).
5.6 In "Parameters" just add "$fullname" (without quotes) if it's not already there.
The contents of the two mentioned files (just plain old .bat files, can be created on notepad):