I would also claim they aren't removing the game's DRM as the games in the OP did not have DRM. The "mod" or "crack" removed Steam DRM. To me, that is a significant difference, and at that point I wouldn't call it a crack. Its a jailbreak.

There was an app called nosteam that allowed you to jailbreak Half Life 2 but you had to install steam and activate the game first. (kind of self defeating). But, a throw a way steam account and a machine you didn't care about would allow to unlock the game files and play outside of Steam. I believe that was shortlived as Steam changed the format of the files. It still works if you extracted the files back in the day, but not now.

The nice thing about Nosteam was once you decrypted the files, you had a fully functioning "thumb drive" copy. No install required. Just copy the files from backup to your hard drive and run the .exe. Was very nice.

Well, in conversations like these legal is determined by the courts at the point of discussion. The software company claim lots of things are illegal. The consumers claim lots of things aren't.

IMHO, fair use entitles someone who legally purchases a game to back it up and modify it as they see fit, provided they don't share the content. It gets sticky because the ability to circumvent DRM doesn't discriminate between legal owners and thieves. So, in the EULA, you aren't allowed to modify (cracking) or distribute said cracks. So, even if you are legal in cracking your own copy, which I claim you are and the companies claim you aren't, no one is in the right in distributing the stuff. In other words: They likely won't win taking you to court over cracking a game you bought. (haven't heard of such a case yet that didn't involved a third party/web site that could be considered a distributor) but they DO win in taking down cracking sites and folks that enable the illegal activity.

So, IMHO its like this:

Illegal = theft.
Legal = fair use.
What is fair use? This area is very grey and heavily debated.
My personal definition of what fair use is (IMHO only). I can do whatever I want to anything I buy... but it stays in my house for my entertainment only. Once I share what I have done (being content, cracks, hacks, work arounds, etc) then the companies can start making a case that I've cost them money. If I keep it all to myself, they already have my money because I don't crack games that I haven't paid for.

Hope that makes sense. This isn't a definitive answer, but I think the reason the poster you quoted said "legal" was because he mentioned buying the game. In his defense, it is legal within reason of fair use.

Well, considering DRM has been stripped out of Half-Life 2 since (you don't even need to launch the game once, just use the .exe file and play), it's not really necessary anymore ;-) There's a good amount of games like that on Steam.

I'm not 100% sure but I think they are. They still require the game files and they basically GOGify the games. Make it work better on newer systems and not needing Steam is simply a bonus.
If you mean NOSteam they are crack makers and their website is very shaddy I wouldn't recommend it.

Yeah, I gather it is quite a murky issue right now, and one that likely is vastly different depending on which country's laws and actual common practice we are talking about.

I guess it also is somewhat dependent on which games are being modded and the publisher/copyright holder's proclivity towards lawsuits.

It does also seem to me that this area of copyright/fair use law is quite malleable at this time -- I sometimes worry whether some precedent will quietly get set and cause many currently allowed or common practices to become enforceably illegal. Like you wake up one day and without knowing it, the government is allowed to do a mass search of everyone's computer files and the quakeiimod.exe you have on your computer now makes you a federal criminal and liable for stiff fines/penalties or at the very least targeted for lawsuits which may require time and money for appropriate legal defense. It seems paranoid and unthinkable as I type it, but still scary to think about.

I know that EFF (Electronic Frontier Foundation) does some work in this area. I found this link which might be useful:
http://www.teachingcopyright.org/ . I do wish there was more reliable information or education on the topic... it feels like almost everything you read these days on the matter is opinion or rumor.

Does anyone know of any other mods for Steam games?

Ioquake3 can be used to run Quake 3 Arena/Team Arena without the Steam client.