It sucks, but it happens.
Incidentally, this is exactly why a large portion of the Valve handbook is devoted to hiring. Letting questionable people into your company will poison the place from the inside, and then from the outside. This is a perfect example of that.
Valve wanted to get into the hardware field. Then the way she went about hiring people made it clear that it was a mistake to hire her in the first place. What else was there to do except layoff the entire hardware team, or let her ruin the company culture by acquiescing to her demands for "let these engineers work here, or this project can't work"? And maybe it couldn't. But preserving company culture is far more important than this particular project, especially at a place like Valve.
What's wrong with how she went about hiring people?
I find it questionable whether you can just assume that Valve's company culture is worth preserving wholesale if it apparently can't tolerate the addition of a few hardware people.
I do disagree with the unqualified assertion that "compromising on people is one of the worst mistakes a technology company can make." Culture is a broad term that covers a lot of things. There are important and unimportant aspects. If you reject a person because they can't work productively in your org, that's one thing. If you reject them because they'd rather go home to their family rather than participate in your after-work Starcraft sessions, that's another. Both can be considered culture, but only one is actually important to the working environment. Furthermore, marking it as the "worst mistake" makes the assumption that compromising on culture is necessarily destructive, which its not. Again, it really depends on which points you're compromising on.
What if most of the team isn't comfortable with the new hire because they're a woman, or they're black, or they're queer? Is it still implicitly a mistake to 'compromise' on keeping the team comfortable and protecting your culture? This isn't hypothetical, we've had recent examples (Kixeye, Stardock's Wardell, etc).
You simply have no evidence to support a claim that she was the problem. I think it's a bit ridiculous to jump to the conclusion that she was, given the things we all know about the game industry. Lots of other explanations are quite plausible in this scenario.
(Turns out he's now working for Oculus VR.)
Tom Forsyth: already mentioned, VR for TF2
Moby Francke: art lead for TF2
Realm Lovejoy: one of the Narbacular Drop people which turned into Portal
Plus a few others that have been there since the beginning, what you would call the core of the company.
Without knowing details it's impossible to know if they were justified or not, but they are surprising because their resumes suggest these aren't slackers.