I finally figured out that the "server is currently too busy" messages I was seeing were another side-effect of running from a case-insensitive disk image mounted on a case-sensitive filesystem. I documented what I've done to work around the problem; hopefully it'll help someone else out as well.

RUNNING STEAM ON A CASE-SENSITIVE FILE SYSTEM

If you have a case-sensitive filesystem, you've noticed that Steam refuses to install. It expects a case-INsensitive system. By default this is what you get with a Mac. This guide is for those of us who, for whatever reason, want or need to run with a more Unix-y case-sensitive filesystem.

I'm going to assume that anyone who's gone to the trouble of making a case-sensitive filesystem can deal with Disk Utility and Terminal. You'll need to make a disk image and some symbolic links, and maybe write a little AppleScript.

1. Decide Where You Want Steam to Live

The first thing to do is to decide where you're going to keep this disk image and associated files. I tend to keep big things (VMware images, CD ISOs, that sort of stuff) in /Users/Shared rather than in my home directory. I'm going to keep all things Steam in /Users/Shared/Library/Steam. You can choose wherever's convenient for you and substitute your own path in the instructions below.

2. Make a Disk Image

Use Disk Utility to make a case-insensitive disk image. I chose to make a 32 GB sparse image. I figure 32 GB is big enough for my needs, and using a sparse image means it won't consume a lot of real disk space until it starts to fill up. I saved it as '/Users/Shared/Library/Steam/Steam.sparseimage'.

3. Pick a Mount Point

This isn't as straightforward as it seems. Normally disk images are mounted in '/Volumes/{image name}'. It turns out that Steam not only wants to be on a case-insensitive filesystem, it wants the whole path to the mount point to be case-insensitive. The easiest way to ensure this is to avoid letters in the path altogether. I decided to make the mount point '/.000'. If you're an old Unix hand (and why else would you have formatted the disk as case-sensitive?) you're probably appalled at that. Yeah, me too. At least the dot means I don't have to look at it.

4. Mount the Disk Image

I wrote a little shell script to do this, but I had trouble getting it to run as a login item like I wanted. So I pulled up the AppleScript Editor and wrapped it in some really cheesy AppleScript. I saved it as an application in '/Users/Shared/Library/Steam/MountSteam.app'.

This creates the '/.000' mount point if necessary and mounts the disk image there. It makes a dandy login item (System Preferences->Accounts->Login Items) to make sure the image is mounted whenever you're logged on.

5. Make Folders

Steam needs two folders to store its data. These normally live in your home directory as '~/Library/Application Support/Steam' and '~/Documents/Steam Content'. Substitutes for these need to be made on the disk image. You can use Finder or Terminal; I'm a Terminal guy.

6. Make Symbolic Links

Now you need to link these directories to where Steam wants to find them.

7. More Link Love

You'll want to make a lowercase path to your home directory, and to the Steam directories. Steam itself doesn't need it, but I've already come across at least one game that does.

8. Run Steam

Have fun with your new toy!