See - I'm not arguing that using a 3rd party program to idle is illegal. I completely agree with you on this one.
I'm just saying that Valve is trying to put the people who used it in a bad light while they claim the moral high ground even though actually more or less the opposite is true. The "3rd party program" clause is clearly there to prevent people from using cheats, reverse engineering their game and whatnot - they can decide to roll it out or not whenever they please, otherwise even things like MetaMod, SourceMod or HLSW might have been outlawed in the past. It's JUST a legal clause not necessarily implying moral guilt. You know - kinda like a baker giving out free bread to the homeless but forgetting to put it on his expenses could be punished by the tax office (true story, happened in Poland

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However, Valve seem to be saying that people have "sinned" for circumventing their "awesome drop system" and HENCE they are punished. I say, no, they shouldn't be punished because it was MORALLY wrong to idle - their drop system is shitty and they only should be punished for breaking the EULA - same results but a very different reason. People breaking the EULA to idle for items are CONFIRMING Valve's mistake and just happen to be doing something illegal at the same time but it's not the straw-man that Valve put forward, which to me sounds like "You broke the EULA hence our drop system is wonderful, since you are a morally bad person", if you reduce it to its components - it should be "You broke the EULA BUT we admit that the system is shitty and understand why you did it".
See, if SO MANY people have idled, then you should take it as customer feedback.
I guess my issues are mainly with the tone of Valve's response.
They should have said: it was brought to our attention that many of you have idled using a third party application. We regret that you don't like the system and will do everything in our power to improve it as quickly as possible. Sadly, we have to remove all the items acquired through the fake idling program, since it breaks the license agreement and would set a precedent for similar or worse applications of this kind in the future.
Instead Valve went like "Ha, ha! Look! We found a way to identify idlers! And we can punish them! Muhaha! We are right, you are wrong! To prove it, we even made halos for the people who didn't idle and licked our asses for the wonderful drop system we implemented to show how bad you are!"
THAT'S what pisses me off, not the fact that my items were removed or that the program was deemed illegal.
Be more humble, Valve, admit your mistakes. To a third party observer everything looks jolly funny since Valve always come up with witty responses and smart jokes about situations like that but recently I somehow got the impression that Valve are becoming more and more arrogant, perhaps because of the financial success they are enjoying and the immense amount of fanboys that meanwhile flock around them and who would even worship Gabe Newell's turd lying on the floor. I guess I'm still under the influence of the whole L4D 2 controversy and this somehow fits into this category in my mind.
Valve seems to become... Blizzard?
Notice how they pointed out how small the number of idlers supposedly is? The implied meaning here being - most of the people are awestruck by our system, while it could very well be that most of the non-idlers didn't even know about the program.
Notice how they imply that around 5% of players (I still think it was more than that - it could have been 5% of total TF2 accounts but a much larger percentage of ACTIVE TF2 accounts) doesn't mean anything to them anymore? We can safely piss off people who were ALREADY dissatisfied with our product even more by presenting them as morally decayed wrongdoers.
I know it's spam but... +1