My confusion is, how can the transistor be on with one node floating?
The question is incorrectly asked because the transistor is off when the node is "floating" and on when the node is grounded.
An open-collector (open-drain) transistor stage without a connected "pull-up" resistor can be represented by a simple SPST switch connected through one terminal to ground; its other terminal acts as an output.
simulate this circuit – Schematic created using CircuitLab
This "configuration" has two possible states:
The switch is off, the output is "floating" (with an unspecified voltage).
The switch is on, the output is grounded (with zero voltage).
So the question "how can the switch be on when the output is floating" makes no sense.