These type of things are always bad, but I don't have to tell you that!
In Texas, What you have described between your stepfather and you is illegal. The car belongs only to him. You have no rights to the car AT ALL.
The deal between your younger sister is a SEPARATE and different transaction.
I am not an attorney, but here is what I would do. Give your stepfather the car back TODAY.
Your "Legal Counsel" IMO, is giving you immoral and unethical advice.
You could always sue your younger sister for the value of the car you gave her.
If you do not do what I suggest this will turn worse that you can ever imagine.
You should get your own car.
"Speed is fine, but accuracy is final" --Bill Jordan
Remember those who died, remember those who killed them.