this is late, but:
"stead" means "place" rather than "in place of another." otherwise, "in stead of another" would mean "in in place of another of another."
"instead" is truly formed from "in" + "stead"
From OED: The two words
in stead = ‘in place’, rarely written as one word before 1620, but seldom separately after
c1640, except when separated by a possessive pronoun or possessive case, as
in my
stead,
in Duke William's
stead. Most frequently followed by
of, in the prepositional phrase
in stead of,
instead of (= Fr.
au lieu de); formerly also
in the stead of, which is still used dialectally, e.g. in the southern counties of Scotland.
- - -
connotatively, though not denotatively, meanings are different. one meaning is for "instead of him." another meaning is for "in his stead' or "in the stead of him" (though the latter has a clunky 400 years ago British feel to it). for the latter, one can technically use "in stead of him," but that should not be encouraged, being too fiddly and unclear for most of the modern reading public.
"i sent the invitation to his house, but his brother came instead of him." in this case, the replacement of brother for him is accidental rather than purposeful. the replacement is not fundamental to the meaning. you can see the weak meaning of this "instead" because you can safely drop "of him." indeed, you can replace "instead of him" with a properly placed "oops." "but, oops, his brother came."
" i challenged him to a duel; his brother came in his stead." in this case, the replacement of brother for him is purposeful rather than accidental. "in his stead" is equivalent to "in his place" and carries connotations of intention (and sacrifice). unlike the earlier case, you can't drop "him" or "his" -- that's integral to the meaning. one can't introduce "oops" into this sentence.
" i challenged him to a duel; his brother came instead (of him)." this certainly lacks the drama of the above sentence. maybe they were drunk or maybe i mumbled and they misunderstood. "in his stead" does not allow that possibility.