She was never his stepdaughter.
You're right.
He just raised her like his daughter until he started screwing her behind his not-exactly-wife's back.
For me, it gives his forays into moral complexities and life's big questions a sort of "I've got the wrong tour guide here" feel.
She was the teen aged adopted daughter of his girl friend (Mia Farrow) with whom he had children at the time. Woody Allen initially lied about his sexual relationship with the under aged Soon-yi. Mia Farrows’s other adopted daughter Dylan claimed Woody Allen also sexually molested her when she was 7 years old.
Step-fornicator?