I did a simple thing, replace a \framed by \framedtext to get \placeinitial working but that doesn't seem to work automatically:%==========================\starttext
\setupinitial[n=2,text=Knuth]\placeinitial\input knuth
\framed[align=flushleft]{\setupinitial[n=2,text=Knuth]\placeinitial\input knuth }
\framedtext[align=flushleft]{\setupinitial[n=2,text=Knuth]\placeinitial\input knuth }\stoptext%==========================