I don't know much about win32 and Event, but:

a) is it possible that starting a new thread could cause the event loop to be run in multiple threads simultaneously? That would probably cause all kinds of problems.

b) if you can't start a thread within a watcher, can't you set a variable somewhere else (update: i mean in a shared/global scope) to signal that a thread should be started sometime (soon) after the watcher is done?