What in the world gives one company the right to prevent you from using what you legally purchased from another company?
I believe the key here is that Steam believes someone was trying to defraud them by ordering content, receiving it, and then canceling the payment method. When this occurs, they may even suspect that the Steam account is not in its original owner's hands, and they wish to prevent the new user from benefiting from anything the original owner paid for.
WoW has a somewhat analogous policy when it comes to violations of their agreement.. if they see suspicious activity on their account, first they ban you under suspicion of being a gold seller, and then they investigate to find out if you may have been hacked instead. Ultimately the process works out, but it can be a bit painful during the investigation period.
I would hope that Steam will resolve this appropriately.. once it's clear that they will be getting their money.
(And agree with all on PayPal.. I use it to buy an occasional eBay item, but as an eBay seller I've also been defrauded by it, as the item I shipped overseas was late in arriving, the buyer complained, and PayPal gave me the options of A) Enter tracking # (which I did not have, since I used USPS), B) Refund entire purchase amount, or C) Close PayPal account, lose all money in it, and never see it again.)