I've seen a couple solutions to this. See this answer for a solution using a java robot to push enter for you during the keypress callback, thus updating the string. This has a side effect of also firing the "Callback" function as well.
I've personally used findjobj.m on the file-exchange to gain access to the java object behind the edit control, and used the "KeyTypedCallback", which does provide an updated string.
I don't have the code in front of me now, but it looks something like this:
% Create the edit ui control
h_edit = uicontrol('style','edit');
%find the java object
jObj = findjobj(h_edit,'nomenu');
%set the keytypedcallback
set(jObj,'KeyTypedCallback',@myKeyTypedCallbackFcn)
The toggling the focus method used to work way back in R14. I did submit a bug report when I noticed that behavior change in R2007, and I also submitted a feature request a couple years ago that MW supply an updated string as part of the keypressfcn eventdata. MW replied that they are investigating implementing this functionality in a future release.
