Interesting find! It looks like there is some plumbers tape on the mortise so perhaps this was a plastic screw type mortise that was then fixed into the shank and the end bit cut off. I have an old pipe where the screw sat a little proud of the shank and prevented the stem from sitting flush - this would be a fix for a problem like that. In any case, smoke it and enjoy!
i thought this would keep that mortise insert from screwing further down the shank. that was the case with this one. It had went down in there so far that it was melting on the fire end. I did in fact use teflon tape to tighten it up and keep it in place. Also, about your stem not pushing in flush; i have a pipe where that mortise insert sits proud and my stem is recessed around it's tenon and fits it perfect.