By "live" I thought you meant out in a gig situation.
I don't step sequence anything when I record my music. I play on the fly and record in that way - sometimes to audio, but mostly to midi first. Still though, I won't usually play a whole line right the way through the track - I'll play and few bars then copy and paste it. The only time I'll play a whole line is if I'm stuffing around doing an orchectral style number or something.
I never quantize beats, but playing the entire rythm section of a track would never work because there are just too many layers - resampling sections could get around this though.
My computer can't really run the latest plug-ins (celleron800) and I really just use it as a multi-track recorder. Step editing seems like a real chore for me on the computer - easier to play it in.
I think most people work in a similar way to me though. I can't imagine the time it would take to write every note into a sequencer.
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