Hi again, Kylie.
I see that you're not online at this time, so I will send you my answer and if you have any additional questions or concerns, simply click 'Reply' and I will be glad to continue our conversation.
First, I would recommend going back to square one and re-introducing Steve and Abby. The scent transfer method is great for this: take a slightly dampened cloth or paper towel and pet one cat, then pet the other, then vice versa. Continue doing this frequently throughout the day. This will deposit each cats' scent on the other's fur, so they will smell each other all the time. In addiiton, you can pet both cats with an old t-shirt of yours; your familiar, calming scent will also help if they smell it all the time on themselves.
I assume you're using the Feliway calming pheromone plug in and if so, that's great! There is also a pheromone calming collar which might be a good idea for Steve, to keep him calmer. You can find it in any pet supply stores and also order online. Here is more information: Calming Collar
There are also two other over the counter oral calming remedies which may be beneficial for Steve. Decide on one and only give that; don't give both simultaneously:Rescue Remedy for Pets
I would still recommend keeping the cats separated when you're not at home to supervise, so Abby doesn't get hurt if Steve is attacking her. However, when you're home, you can supervise and if you see Steve about to attack, instead of using the spray bottle, stand out of sight and shake a can of pennies or pebbles. The startling sound should stop Steve in his tracks and he will associate his action with the unpleasant sound. It's important that he doesn't see you, because you don't want him associating the sound with YOU, but with his actions.
Eating is a pleasurable activity for cats, so you can try to feed them both cat-healthy treats, side by side or at least in the same room. This should help with some of the tension.
You can also play with them with interactive toys and other types of toys they can play with on their own. Below, is a list of some favorite toys and a dvd they should enjoy. If you enrich their indoor environment, it might be easier on Steve and playing together would help them bond more easily.
When you get the new toys, divide them into several groups. Change out the groups every few days, and they will feel like they are getting 'new' toys, which will intrigue them!
You should have or can get, a tall kitty condo or cat tree with different levels, shelves, and 'hidey holes' for playing, sleeping and scratching (these are covered with carpet). They will also enjoy a foraging toy, which fulfills the natural instincts of stalking and hunting prey.
Interactive toys you can play with them are laser pointers and feather dancers or fishing pole toys. There are even 'automatic' laser toys which you can set on a timer.
These are some examples of what's available; you can find many of these types of toys, etc. at your pet supplies store or order online--whichever is easiest for you.
One note: re: the feather dancer/fishing pole toy--don't leave this alone with them, as pieces can be chewed off; always play WITH them, under your supervision, then store the toy where they can't get at it.
I agree with you that keeping him in, when Steve is used to being an indoor/outdoor cat may be adding to his stress and new, angry personality. I also understand that you're afraid he might not come home one day. If you're able, put up a safe cat enclosure or a cat fence that will keep him in the yard, etc., but not allow him off your property. Here are some examples: http://www.purrfectfence.com/
I always prefer to recommend a prescription anti-anxiety medication from the vet as a last resort. If nothing else seems to work for Steve, discuss this option with his vet, just to use short-term, to see if it helps him get used to Abby and be less angry. I wouldn't let him outdoors while he's on this type of medication, though.
I hope things start to improve for Steve and Abby very soon. I know how difficult this situation is for you, but hopefully, he'll come around.