use a different approach to the $"…" problem:

take the states that may open a string, only permit them by virtue of
moving the code out of Subst: to handle $+" and $+' at all; then add
S[Q]BRACE to that

side benefits:
• clearer, cleaner code flow
• smaller code
• better “business logic” ☺
• defuses one heavy use of duff’s device a bit

lex.c

@@ -23,7 +23,7 @@
 
 #include "sh.h"
 
-__RCSID("$MirOS: src/bin/mksh/lex.c,v 1.180 2013/02/17 05:40:16 tg Exp $");
+__RCSID("$MirOS: src/bin/mksh/lex.c,v 1.181 2013/02/17 06:05:02 tg Exp $");
 
 /*
  * states while lexing word
@@ -348,6 +348,22 @@ yylex(int cf)
 				*wp++ = OQUOTE;
 				PUSH_STATE(SDQUOTE);
 				break;
+			case '$':
+				/*
+				 * processing of dollar sign belongs into
+				 * Subst, except for those which can open
+				 * a string: $'…' and $"…"
+				 */
+ subst_dollar_ex:
+				c = getsc();
+				switch (c) {
+				case '"':
+					goto open_sdquote;
+				case '\'':
+					goto open_sequote;
+				default:
+					goto SubstS;
+				}
 			default:
 				goto Subst;
 			}
@@ -382,8 +398,8 @@ yylex(int cf)
 				}
 				break;
 			case '$':
- subst_dollar:
 				c = getsc();
+ SubstS:
 				if (c == '(') /*)*/ {
 					c = getsc();
 					if (c == '(') /*)*/ {
@@ -504,30 +520,9 @@ yylex(int cf)
 					*wp++ = '\0';
 					*wp++ = CSUBST;
 					*wp++ = 'X';
-				} else if (c == '\'' || c == '"') {
-					switch (state) {
-					/*
-					 * states in which $'…'/$"…" are
-					 * invalid; still not too sure about
-					 * which must be included/excluded…
-					 */
-					case SWORD:
-					case SDQUOTE:
-						goto DNQUOTE;
-					}
-					if (c == '"')
-						goto DEQUOTE;
-					/* c == '\'' */
-					*wp++ = OQUOTE;
-					ignore_backslash_newline++;
-					PUSH_STATE(SEQUOTE);
-					statep->ls_bool = false;
-					break;
 				} else {
- DNQUOTE:
 					*wp++ = CHAR;
 					*wp++ = '$';
- DEQUOTE:
 					ungetsc(c);
 				}
 				break;
@@ -705,7 +700,7 @@ yylex(int cf)
 			if (c == '"')
 				goto open_sdquote;
 			else if (c == '$')
-				goto subst_dollar;
+				goto subst_dollar_ex;
 			else if (c == '`')
 				goto subst_gravis;
 			else if (c != /*{*/ '}')
@@ -816,16 +811,15 @@ yylex(int cf)
 					*wp++ = c;
 				}
 				break;
+			case '\'':
+				goto open_ssquote;
 			case '$':
 				if ((c2 = getsc()) == '\'') {
-					PUSH_STATE(SEQUOTE);
+ open_sequote:
-					statep->ls_bool = false;
-					if (0)
-						/* FALLTHROUGH */
-			case '\'':
-					  PUSH_STATE(SSQUOTE);
 					*wp++ = OQUOTE;
 					ignore_backslash_newline++;
+					PUSH_STATE(SEQUOTE);
+					statep->ls_bool = false;
 					break;
 				} else if (c2 == '"') {
 					/* FALLTHROUGH */