In practice with Lucene, len(string) and len(query) are like 10. So it's totally irrelevant. Furthermore computing the step is extremely fast: you're just doing a handful of min()'s. Even a single cache miss is going to completely dominate that, let alone a disk seek. What matters is that you don't scan a 10 million word index, instead you want to prune your search to hit, say, 50 words in the index.
That's just the step() approach. After that I described how to build the DFA, which gets you the same optimal linear time that you want which does not depend on the query string size.
Reply to other comment:
> Your DFA construction, while a bit incomplete (you don't say how you do the transitions), achieves roughly the same thing as Levenshtein automata do. But you spend significantly more time to construct it. The point of the original paper was not to show that DFAs can be used to compute Levenshtein distance, but to show how to do it quickly and efficiently.
Why is it incomplete? You just follow the step() automaton and construct a DFA that does the same. Every time you hit a new state you create a new node in the DFA, and if you hit an old state you just point to a previously constructed DFA node. You can even do the DFA construction lazily.
> But you didn't implement Levenshtein automata.
A Levenshtein automaton for a word W is a finite state automaton that accepts all words V within edit distance n from W. That's exactly what I built. The point here is that you turn a 30 second search over the whole index into a 0.02 second search by pruning. If you can then optimize that to 0.015 by making the automaton more efficient that's nice but you can hardly claim that what I did is not a Levenshtein automaton because it's a bit slower (and it's not even clear to me that it would be slower).