WTF? I thought that one of the finite beauties of Steam was that the CDKEY would be tied to a users account information so that the CD/CDKEY would no be usable by any other user - and remove the need for physical media.

Apparently that presumption is partially inaccurate.

The tieing of the CDKEY to a non-transferable user account DOES kill the second hand game market. But YOU STILL NEED DISC 1 if you want to play standard HL2 retail! [sarcasm]I wonder if steam purchasers need to wait until they get the game in the mail before they start playing?[/sarcasm]

Just because I did my part in keeping the capitalist marketplace alive and well by purchasing a product in a store whose sales tax will go into my community - why am I punished?

The steam customer support pages would seem to imply that you don't need the CD...
[snip]
Question
Can I use my Steam account on other computers?

Answer
Yes, you can use your Steam account on as many different computers as you like - but only one at a time!
For example, you could use your account on your work computer during the day, and on your home computer at night. On the weekend, you could even use it at a friend's house. Steam will automatically download all of your games to whatever computer you are currently logged in on, and your Friends list will be automatically duplicated on that machine.

[/snip]