A battle isn't a mechanical thing, it's a thing in the game's fiction. Fnord, it'll almost always be obvious to you when the gunlugger's in a battle vs when the gunlugger's just being violent. When you aren't certain, you can safely go with "sure, this counts as a battle."
Everybody -- the optional battle moves, including the battle countdown, are for when (a) there's a battle, plus (b) you want to use them. You can have battles without them. I almost never use them and we have battles all the time.
For purposes of inflicting harm, the gunlugger's gang stats supersede the gunlugger's weapons. For purposes of joining battle, the gunlugger's weapons totally still apply. The gunlugger has only a knife? She can't, then, join battle with a gang at long range; she can fight with them only when they're right there with her. In other words: what DWeird said.
This means that there will occasionally be circumstances where the gunlugger could already inflict as much harm without NTBFW as with it. However, NTBFW always gives her the benefit when it comes to suffering harm herself.
-Vincent