As with most ritual activities, there are ways to hang a mezuzah and ways not to hang a mezuzah. This link
takes you to stam.net's comprehensive directions on how to hang a mezuzah. This post has some examples of how not
to hang a mezuzah.
It's a good idea to wrap the scroll in something before putting it in the case; it protects it from dust and other airborne yuk, and to some degree from moisture. R' Askotzky at stam.net recommends wax paper. Some sellers will roll them up for you in plastic wrap.
This applies particularly if the case is openwork, even more particularly if it's going to get painted over. On the whole, it's better to take the mezuzah down before painting.
In this particular case, paint had trickled down inside the roll, so that some of the letters were completely obliterated.
And it had stuck to the case.
And when it was finally extracted from the case, see what had happened!
This is a spectacular example of why coated mezuzot are not a good idea. The parchment of a coated mezuzah is covered with white paint before the scribe starts to write This makes the surface much smoother, so the mezuzah is easier to write and the scribe can fit more into his day. This means they can be sold more cheaply.
Unfortunately, paint is more brittle than parchment, and it has a tendency to crack and flake. Here, moisture from wet paint has affected the surface - steamy kitchens, hot radiators, and humid weather can have similar effects. The paint and the parchment react to moisture and heat at different rates, and they pull apart because they're doing different things. The mezuzah very easily becomes pasul (invalid). Uncoated mezuzot are certainly rather more expensive, but they're much less likely to go pasul.
Left: it's not nice to roll it with the writing on the outside. Neither is it nice to roll it top to bottom. It's supposed to be rolled side to side; if you roll it top to bottom and then hang it, the writing lies sideways instead of being upright.
At right: upside down. The three words כוזו במוכסז כוזו are supposed to be at the top, and they're supposed to look upside down. When those words look the right way up, the scroll is upside down. (Further reading: Mezuzah
in the Jewish Encyclopaedia
, scroll down to the section on Superstitious Conception