That's not a steam game, that's a user mod (read: random binary downloaded from the internet and executed). Also, it doesn't need kernel level access to do any of that stuff, it can get by just fine with normal application level permissions.
This is no different to downloading a random binary off the internet and being surprised it's malicious.
I've been wondering is how long before we get a 'PC-console' dedicated gaming device, there's certain aspects where PC is falling into the gravity well of the console model. Whether that's the technical aspects like how far you can lock down for security (and who's security) or DRM, whether people only want a nice front end, whether everything should be managed by a defacto 'good' platform holder versus allowing companies to do their own thing (clients or commerce). At some point such a thing looks like a more expensive ultra-pro console.
Then that has to be balanced against the freedom aspect where people want flexibility to build a workstation how they want and do what they want on it, and expecting it all to work (windows games being supported on non-windows is a more common issue now). PC casts the broadest net and catches a lot of different desires, similar with how high-end and low-end seem to be splitting over the past ~5 years rather than being a continuous spectrum I wonder if there will be distinct types of PC for gaming (eg set models like the old Commodore Amiga) or if trying to resist splits does more harm than good.
Speaking for myself, I would never buy such a thing. The reason I game on PC is because I need a decent PC for work anyway, so building one that can also game is cheaper than buying a console.
If I was really concerned about security I'd sooner dual boot into a second OS that had nothing on it, than buy a second box just to game on.
This is no different to downloading a random binary off the internet and being surprised it's malicious.