Oh, the memories! I was so upset when bunny-hoping was mostly removed when CS:GO was released. I played the HNS (hide-n-seek) mode in CS 1.6 more than the normal game-mode. Most of the HNS mechanics were based on game bugs: bunny-hopping, long-jump (sync mouse movement with player movement), edge-bug (not dying if you fall from any distance on a 90degree edge at a specific distance), jump-bug (not dying if you fall from any distance if you jump exactly before you hit the ground), surfing (gaining almost infinite speed when sliding horizontally across a tilted surface).

I actually stopped playing CS entirely because this mode could not be accurately reproduced with the new CS:GO physics engine.

That is surprising. I had assumed that CS:GO was an incredibly steady cash cow. IIRC, CS:GO pioneered the digital collectibles + loot box market, and has somewhere between 600k to 1.1M+ active players during any given day. https://steamcharts.com/app/730

The trading market also seems particularly active and Valve takes a cut of each transaction of their digital goods. It's an attractive model. There are dedicated companies that have sprung up around it and seem to prosper.

Other indirect indicators seem to be green as well. Back when it was a phenomenon, it sold at least 25M+ units before it was made free-to-play. This is on par with Minecraft. The installed player base is in the hundreds of millions. It's essentially a giant social network with multiple monetization opportunities.

I am struggling to see how this wouldn't be profitable.

Surely, Valve must make enough in a month to hire 50+ people and give them 18 to 24 months to re-write the engine?

An example of this in the Quake 3 engine (and now permanent behavior in the CS series) is air strafing. It's a glitch in how Quake 3 handles motion vectors. But it's now also enshrined behavior, complete with entire game modes in CS built around it (KZ & surf maps). If you went and made an entirely new engine, or even just used something off the shelf like Unity or Unreal, you'd have to add that bug back. It's core to the gameplay now.