You could argue that it has been, but "being shit" and "enshittification" are different things.
I don't think it's been shit. As a customer, Valve is one of the only companies left that I feel good about giving money to.
But it simply has not been enshittified. From Doctorow:
"Here is how platforms die: first, they are good to their users; then they abuse their users to make things better for their business customers; finally, they abuse those business customers to claw back all the value for themselves. Then, they die. I call this enshittification, and it is a seemingly inevitable consequence arising from the combination of the ease of changing how a platform allocates value, combined with the nature of a "two sided market", where a platform sits between buyers and sellers, hold each hostage to the other, raking off an ever-larger share of the value that passes between them."
Valve hasn't started abusing gamers to benefit developers in any way that I can tell. Compared to the rest of the video game industry, Valve treats both very well.
> I would argue their early business model directly lead to the death of game modding in the first place
Game modding isn't dead or anywhere close to dead, so no.