Swiffer has a whole lot of opinions for a large lack of knowledge.
Zdewd had it right - the loss of source code is much more drastic than the loss of the game. Yes, everyone will pirate it, anyway. But the engine would bring in more profit, allowing for better quality in the next product.
Not to mention it would allow for more games to be released using the engine. Now the engine's flaws are out there for all to see, which will lead to more powerful online cheats, degrading the experience for all.
I still don't think you have a point about Valve being in the wrong, either. If someone robs my house, and the police investigate the wrong person, I would not feel guilty. I did nothing wrong, I simply reported a crime. Rather, if I didn't report it and take the risk that someone might be wrongfully accused I'd feel bad when my neighbors get robbed as well, knowing that had I reported it the police might have caught the crook beforehand.