The Blum Blum Schub (BBS) pseudo random number generator (PRNG) is defined inductively by $$ x_{i+1} = x_i^2 \mod N $$ to generate the bit sequence $b_0b_1b_2...$ where the bits are taken to be the parity of the integers $x_i$, and $N$ and $x_0$ must satisfy particular properties (see this post for example).
The BBS generator is a cryptographically secure PRNG, modulo the Quadratic Residuosity problem; given the integer $N$; the authors reduced finding the prior bit stream to the problem of finding the two prime factors of $N$.
What I am unclear on is why the authors assumed the adversary has access to the integer $N$ and or $x_i$. By the definition of a cryptographically secure PRNG on Wikipedia, given part or all of the internal state, an adversary should not be able to reconstruct the prior stream of random numbers. Under this definition, would it not be sufficient to claim that the "internal state" is not the integers $x_i, N$, but rather the stream of bits $b_0b_1...$?
After all, if I am not mistaken, if an adversary obtained access to part of the pseudo random bit stream, then uniquely determining $x_0$ and $N$ from just that information should be very difficult or undecidable, so I am not sure why the authors reduced the challenge of reconstructing the prior bit stream to solving the quadratic residuosity problem.
In particular, how exactly is the "internal state" of a PRNG defined, if not off the random bit stream? Is the internal state defined as being the random seed? A few iterations after the random seed? If so, and the PRNG "seed" is reliant on a set of secret parameters $a_1, a_2,...a_m$, then how many of those parameters should be revealed to constitute an "internal state"?