From up above, set (z)

start at         11111111111111111111111111
deadbit string = 11111111111111111111111110

start & deadbit = 11111111111111111111111110
this is > 0, so xor.
(start ^ deadbit) & start = 00000000000000000000000001

Bang! one and, a conditional, and an xor jumped you past 67 million some odd invalid sets.

Another one, from above, set (ABCD)

start at         1111
deadbit string = 1110
start & deadbit = 1110
this is > 0, so xor
(start ^ deadbit) & start = 0111	(starts at BCD

Here's a more complex example. Assume our first set was ABC, and our next was ABD. (A = 0, B = 1, C = 2, D = 3). When we hit ABD, we flag C as our deadbit and our deadbit string would be 0010.

Let's try a complete runthrough:

1111
	1111 & 0010 > 0 -> (1111 ^ 0010) & 1111 -> new index is 1101
1101  ABD	(1101 & 0010 == 0)
1100  AB	(1100 & 0010 == 0)
1011		(1011 & 0010 == 0)
	1011 & 0010 > 0 -> (1011 ^ 0010) & 1011 -> new index is 1001
1001  A D	(1001 & 0010 == 0)
1000  A		(1000 & 0010 == 0)
0111
	0111 & 0010 > 0 -> (0111 ^ 0010) & 0111 -> new index is 0101
0101  B D	(0101 & 0010 == 0)
0100  B		(0100 & 0010 == 0)
0011
	0011 & 0010 > 0 -> (0011 ^ 0010) & 0010 -> new index is 0001
0001    D	(0001 & 0010 == 0)
0000 ()		(0000 & 0010 == 0)