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The steam dumped in the intake heats the intake. If it were inert it would lower thermal efficiency of the cycle, and with a gaseous fuel source like propane that would be bad. With gasoline it increases fuel vaporization early in cycle and thus increases fuel economy as you said. But steam is not inert in this cycle. The first phase change is steam to water, where the steam dumps most of it's heat to the intake air while condensing into tiny droplets. During compression the heat that would normally be absorbed by the air is absorbed by the water this does not really add efficiency, it just shuffles around the heat, since it initially was wet steam there is more water mass now than there was steam mass at the beginning which allows for more heat to be absorbed than was originally rejected to the air. The extra water in the steam also moderates the temperature of combustion. This continues through combustion and the power stroke finally giving dry steam with exhaust gasses. Yes the thermal efficiency should be much better with a turbo, but this is what I have to work with right now. I am not violating the laws of thermodynamics nor Carnot's heat engine, I'm simply massaging an Otto cycle adding some Rankine elements and creating something slightly new.
As for heating only with engine coolant. I've done steam injection already, albeit badly. It drops coolant temperatures because it removes heat from the cycle because it's wet steam. Using the coolant is self limiting because the steam acts as internal coolant. Exhaust heat is prevalent and free. The only concern is preventing superheat which should be easy enough with a thermocouple and some experimentation.
Still need a turbo to get the biggest gains. Then it would be a true coexisting Rankine cycle.
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