Hi,
I think your proposal to change one digit at a time is strange, because it actually provides the user with misinformation... what I would consider would be actually to add much MORE state changes, and implement it so that whenever the signal changes, they gauge moves towards the new value in increments of one. This would provide an analog-gauge like experience and "animation" of the change; the operator would very soon recognize subconsciously that digits rotating in sequence 0,1,2... denote increasing speed and 9,8,7,... decreasing speed.
E.g.:
Filtered signal Display
0000 0000
2345 0001
0002
...
2345
Hysteresis, which you have implemented, is of course very good for the stable state.