One day at the puzzle factory, while doing something completely unrelated, I came up with the following “add a letter” sequence:
HE
HOE
HOSE
HORSE
HOARSE
You’ll note it starts with a legitimate two-letter words, and that the one letter added each time is added to the interior of the word, not to either end. (Thus I can’t take it to “hoarser” for a seven-letter word.)
So far I haven’t been able to match this, let alone beat it – can you?
Best I’ve come up with is
BY
BUY
BURY
BURRY
BLURRY
just thought of another one
MY
MAY
MANY
MANLY
MAINLY
Nice one! I think that’s better than the first – “burry” is a little cheesy, don’t you think?
Damn, I’m impressed – I’ve been devoting odd moments to it for a couple of weeks and coming up with nothing.
A nice way to kill a slow day at work…
BY
BAY
BRAY
BERAY (I admit, I had to search for that one…)
BETRAY
May be, but it’s in the dictionary. Cheese is a food too. 
Sorry if I offended you by using the word “cheesy,” Knowed Out – I just meant I preferred the second one as being all words one is likely to use in day-to-day conversation. You came up with two in less than half an hour, and that truly impresses the hell out of me!
In
Tin
Tins
Tints
Stints
I had a lot of hope for myself here.
As
Ads
Aids
Aides
Asides/Abides.
The Dude Abides. 
congodwarf – nice try, but you missed one of my rules – additions are to the interior of the word only.
Candid Gamera – excellent! It hadn’t occured to me to try “as.” I was esp. impressed that you have two possibilities for your last step.
We’re all topping out at six letters – is this really the upper limit?
Depends on the rules… I’m trying to avoid foreign languages, abbreviations*, acronyms, and proper nouns, of course. Most of the chains I find end up at most 5 letters long… I got lots of those.
*Unless they’re like ‘ad’ which is dirt-common.
Not really an abbreviation – a shortening. Abbreviations usually have periods after them.
re
rue
ruse
reuse
refuse
[it is to my dismay that “refusee” is not a word]
Though I will rue your decision, go ahead and refuse “re”, but if you find it was not a ruse, feel free to reuse it.
re
rue
ruse
reuse
recuse
recluse
(bam!)
Um, how could I possibly disqualify it after such an eloquent plea? 
Or even
re
rue
reuse
recuse
recurse (? dictionary.com has it)
recourse
Damn. Here I was think I was so clever and I can’t even read.
Ok, I’ll try again.
OF
OAF
Nope, that didn’t work.
Ok, I suck. Now I can’t even think of any 2 letter words.
RE
RUE
RUSE
REUSE
REFUSE
or
RE
RUE
RULE
RUBLE
ROUBLE RUMBLE RUBBLE
If we allow transformation into two or more words (of two letters or more) but no appending to start or end of any word we can make this go further… and possibly generate infinite loops
REFUSE
REF USE
REEF USE
or infinite looping
REFUSE
RE FUSE
RUE FUSE
Assistance for folks still chugging away - I dead-ended trying to exploit Do, It, If, An, So, Me, Of, To, Be, Is, and Us at four letters (or less!) … the farthest I got with ‘In’ was to split it into Inn or Ion … from there Ion can be Icon or Iron… but I could think of no more.
-ho-hum looks like great minds think allike, I was preparing that in a text editor, and not just copying everyone else. Re is a perfectly good word, the musical note scale do, re, mi fa, so la, ti, do every scrabble sufferer should know.