A lot of people here seem to think Nintendo would not claim it illegal without the circumvention code or wouldn't write a letter saying that. This is totally wrong and shows a complete lack of historical understanding of Nintendo and their legal threats and lawsuits going back decades. Nintendo has repeatedly sued even when they lose. Nintendo has even sued companies for making unlicensed games. Not homebrew, but commercially successful games.
Others seem to believe valve would suddenly be okay with it without circumvention code. This seems naive at best, delusional at worst. That letter includes a threat to valve on distribution. As above, Nintendo isn't going to say "it's fine now I guess". They would happily sue valve with or without the code. Valve may want to partner with them someday.
Valve may be better than most but it seems very unlikely for them to want to die on this hill. The good will does not seem worth the trouble.