Well first off, if you're going to sidestep you want to use the
actual sidestep command, 22/88 or 2/8H+P+K (depending on how you have set it in options) to avoid strikes. It has far better evasive properties than simply trying to freestep with [2] or [8]. This is similar to what using a quickstep in SCV does.
As to when to sidestep, that is another thing you have to be careful with because the sidestep command has a bit of recovery on it.
There are a few applications of it that work well.
On the approach....
Skip to 2:50
I know Vanessa wants to stop me with Jann's long-range mid kicks, but I also know they are very linear. Realizing that there is more than a little tunnel vision going, I decide to run just to the edge of the killzone and step, hoping to bait a linear whiff. On the second attempt at 2:54, it works perfectly and I I take advantage of the situation.
Another way is to wait until you are at a minor disadvantage and use it the same way you would in Soul Calibur or VF. For example, I use 4K with bayman and it gets blocked, putting me at -3. I am safe, so if I am anticipating a linear strike in response I will simply step it in anticipation.
Now the most SOLID reason to use a step is break the delay mixup. What I mean is, if you notice there are a lot of strings that have a major delayability factor to them. Even if they are unsafe, if they can be delayed forever that keeps the defender on lockdown, guessing when to strike. A smart way to break that is to wait until right before the last possible strike in the string, and then step into an attack. If your opponent strikes, he will whiff and you'll hit him. If you stepped early enough and buffered your strike, he wont be able to throw you during your step either. This method can be used to break faux lockdown situations very effeciently.
and looking for somewhere to poke them. Hasn't worked out particularly too well, but for now I'm just taking my beatings and trying to learn what's what.