I am wondering if UltraEdit support "live text highlighting" when searching in a file? Example: Dynamically highlighting matched content as I type the search string.

SublimeEditor and Textmate both have this feature and I can't seem to live without it.

Thanks in advance

In UltraEdit there is Search - Incremental Search. As you can read on the linked page, it positions the caret to first string found according to what you have already typed with selecting it.

This command does not highlight all occurrences of the string already entered as displayed in the status bar. If you want to highlight all occurrences of the word selected after the incremental search, hold SHIFT and double click on the selected word. This feature requires setting Shift+Double Click highlights all words which match word under caret being enabled at Advanced - Configuration - Search - Advanced. It is also possible to execute command View - Highlight All Selected by key instead of using Shift+Double Click once you have assigned a hotkey to this command in key mapping configuration dialog.

Hm, I think it would be good for you (not for me) if the setting Use persistent highlight all at Advanced - Configuration - Search - Advanced would be also taken into account for Incremental Search. I suggest to send a feature request email to IDM support with the suggestion to highlight all occurrences of currently entered string during and after an incremental search if Use persistent highlight all is enabled in configuration.

Update:
The Incremental Search command was enhanced to a Quick Find command with features like in browsers and as explained at Quick Find versus Find and how to customize the usage of both in UltraEdit v21.00 and UEStudio v14.10.