You are most correct, the real work is done on the half steps in kata. The half steps, as you said, are the moves leading up to the preserved technique itself. This is where the mind can't freeze up. To read kata, we need to read between the lines, so to speak. The thread should readI will say this: Styles do not teach anything. Systems do not teach anything. Instructors teach. Most "real world" systems I've come across do not put such focus on "awareness" of what could happen, at least no more than most traditional systems I've come across.
People often don't take the time to analyze a style and see the equal potential in every aspect. The realism of traditional Karate is hidden in between the motions. The setup for a technique is a technique itself. Karate finds criticism because it's techniques are too often too slow to the mind's eye that chooses not to see the whole thing. When setting up for an inside block the opposite hand moves to the blocking point so that the block is done with more power. People only see the motion of the other hand as a setup for power. The setup itself deflects or even grabs the attack before the block even needs to.... Just saying.
"Why the misreading of kata, is not effective for self-defense." IMO