Actually a lot of people misunderstand the ESRB. The ESRB *IS* a private organization created in the same spirit as the "comics code authority" that used to regulate comic books, and lead to the virtual death of Lurid/gory old horror titles like "Tales From The Crypt" and "Vault Of Horror" as well as the rather well known comic hero "code against killing".
This is done out of fear of goverment regulation, but ignorant people who for some reason think that private police will be less limiting than federal ones. But the goverment is very limited in what it can actually do to control information due to this little thing called "The Constitution" and is mostly good at making noise. Private organizations have far more of a free hand and rapidly become catspaws for politicians who use them (via favors or threats or whatever) to do things that they otherwise couldn't.
The ESRB also cut deals with distributors and such as to what kinds of titles/ratings they will carry without pressure from the ESRB (protests, harassment, etc...) which is in part the root of their power. They declare something AO, Gamestop won't carry the product (for example) and it limits the company's abillity to sell/distribute it. If they do so anyway the ESRB makes their lives difficult and pressures all the other companies being ESRB regulated to refuse to use that chain.
Really though the ESRB gets it's power from the game companies themselves, and is tolerated by the illusion that it's less dangerous/oppressive than the goverment, which it is not.
Oh sure, the feds can TRY to regulate video games, but in general they have failed with movies and comics except in the short term. Plenty of precedent exists for doing the same thing with video games. The problem is though that it costs a lot of money to fight the feds and can keep people tied up in court for years. So ultimatly Valve would be putting millions of dollars into limbo from LFD2 development, as well as spending millions in legal fees (at least in the short term) to flip a middle finger at the ESRB and the goverment. Basically I think most people agree with this, they just don't want to spend the money, and would prefer for someone else to do it. A serious strike against the ESRB/Feds would involve all the companies getting together for something other than price fixing and ultimatly splitting the cost of the legal offensive.
International law probably enters into it as well, a lot of nations claiming that they have free speech ultimatly do not really have it (or at least not to the American extent). For example if the game industry wins against the ESRB that's fine for America, but then they have to look at making two versions of the same game unless they go up against organizations like PEGI (the European version) and Euro-Law is a lot more restrictive than American Law and it's a whole new battle, of course given a lot of Euro-Horror, the failure of the "Video Nasties" thing, and of course comic franchises made under the "2100 AD" label and similar things the industry would win, but it's another whole battle to ensure uncensored international distribution.
So really, Valve is being a bunch of spineless putzes when you get down to it, but they are doing so because they don't want to be the ones to lead the charge by giving them the middle finger and going toe to toe with all of the private and public forces arrayed against them. Sadly we don't have anyone willing to play the role of the independant comic developer.
As far as their poster goes, look at the promotion of movies like "SAW" which have involved severed fingers, and people strapped into torture devices on their promotional posters. The Saw franchise is an "R" rated movie franchise and doesn't go anywhere near as far as it could with this stuff (or the content of the movies) despite the hype/criticism. The same can be applied to "M" rated games that are fundementally an "R" rating and can do anything other than showing sexual penetration (though it can be implied to a ridiculous extent as long as there is no actual money shot).
>>>----Therumancer--->