My problem with "just in time" setting development (good term for it, by the way) is that inevitably I'll contradict myself, often within the same session, as I won't remember what I said earlier.
Players: "While in town we'll stay at the Silver Salmon, where we stayed last time."
Me: "OK, the Silver Salmon Inn is in the middle of town, giving a good view of the main market square."
Players: "Last time we were here it was down by the docks. We had to walk to the market, and Jocasta's pocket got picked on the way, remember?"
Me: "Uuh...OK, I guess? I remember the pocket-picking, was that en route from the Salmon?" ... and bang goes the flow.
Making notes on the fly is a poor option as I can't write and talk at the same time (or if I did, both would be incoherent
) and stopping every 30 seconds to make notes isn't conducive to any sort of flow or rhythm. But if I've got this noted somewhere I can refer to it on the fly and keep things consistent.