What does "wound up" mean in this case?

Wind up: to bring to a state of great tension; excite (usually used in the past participle)

I believe that the derivation is from an old pocket-watch; they had to be kept wound up (otherwise they would stop ticking) but not wound too tightly (otherwise the internal mechanisms would break.) I never had a pocketwatch, but my grandfather did, and he left us a choice phrase: "That boy is wound tighter than an idiot's watch."

There is also an expression "to get/put the wind up (somebody)" (to scare someone or make them feel anxious - probably originally a hunting term, from the way small game reacts to a sudden wind), which is superficially similar to "to wind up (a watch, or someone's nerves)".

Note on pronunciation (pace @PLL):

• wind up - IPA waɪnd - rhymes with "find"
• put the wind up - IPA wɪnd - rhymes with "finned"
• wound up - IPA waʊnd - rhymes with "found"

"Wound up" in the sense of "keyed up" or "upset and nervous"; this idiom is a reference to "winding up" clockwork with a key, implying that winding it more might make it break.