There is a gap (about 1/8" to 3/16") between the fiberglass steps and the concrete surface. Is there any good product to fill that gap in to prevent water from getting down in there and make it look better? They had some silicone in there before, but I have heard silicone does not adhere to the gel coat surface of the steps. Anyone had success of filling this gap in with a product??

they make a putty that hardens under water, works great. It does dry white though.

Follow this link, You may be able to find something similar at your local pool place.

This is extremely easy to apply and once hardened, can be sanded for a smooth surface.

http://www.shopmemphispool.com/Pool-Putty-p/6571-0.htm

Its not underwater, the gap is on the deck surface. See below and yes there is no gel coat on the steps. Also the steps have some vertical movement that I notice, but only noticed since there is no water in the pool, they can move about 1/16" when you step on them. Is this normal? I hear you can drill a hole and spray foam below them. Any thoughts?

Yes, its called deck-o-seal

http://www.deckoseal.com/

i wouldnt worry about your steps moving a 16th of an inch.....