You'll be most of the way there if you change the event that's handled to a Key Down event for the string control, rather than for the entire VI. That way you don't really even need to worry about key focus. You have the string control set to "Limit to Single Line" so the new line won't actually be added to the string but you'll still get the event.
The other problem is that you read the string value outside the event structure, so the value that you write to the indicator will be stale when it's written. The string value doesn't actually update until you hit the enter key. The event fires the moment you hit enter so it uses the value that's on the wire at that time, which is the value from before you hit enter, so your indicator gets an old value. There are several possible solutions. A simple but not necessarily good option is to set "Update Value While Typing" and assume that the user will always wait at least 10ms between the last keystroke and enter. Of course if you increase the timeout value you risk missing some characters, and there's not really a need for a timeout case at all in your event structure (just make a separate case for the stop button). Putting the string control terminal inside the event structure doesn't solve the problem - the event still occurs before the new value is processed - but, oddly, reading the value from a property node inside the event structure does work (although reading it from a local variable does not). You could also register a dynamic event that triggers the indicator to update based on the control. You could add a boolean shift register to act as a flag, and handle the value changed case for the string control as well. In the value changed case, if the boolean is set, update the indicator, and always set the boolean to false.
Sorry that's all rather complicated, there are quirks to LabVIEW's event processing. The easiest reliable approach is probably reading the string control's value from a property node inside the event case. While property nodes are not generally recommended, especially for getting or settting a value when the terminal is on the same front panel, in this case I think it's the least complicated solution.
