My current opinion... both Microsoft & Bungie need to lighten up. If fans create something of a game, usually this is a good thing. I dunno, I would have loved to see your mod.
There has been a lot of misinformation about this going around. I can't see why, as the lead for Halogen, Dispraiser, has been interviewed on several different sites and has given a complete and exhaustive account of events. It seems that other people are somehow motivated to twist the story into something else.
Halogen was not issued a C&D. They were informed by Bungie that one would be forthcoming. Bungie attempted to intercede on Halogen's behalf with Microsoft to no avail, as they do not have final say over such issues. Bungie urged the Halogen team to continue working on their mod as a work of original intellectual property, as much of the team's work was original. They are doing so.
Halogen was not a mod of Halo. It was a mod of C&C Generals. The makers of C&C Generals, as far as I know, had no objection. If Halogen had been a modification of Halo Custom Edition to make it more like C&C Generals, I doubt Microsoft would have objected. The makers of C&C Generals, however, very likely would have!
User created content for the Halo game engine adds value to Halo as a platform. It gives people a reason to keep playing the game, and it reinforces the community around the game.
A modification for another game, based on designs and artwork from Halo, characters from Halo, and story elements from Halo, does very little for the portion of the Halo community which Microsoft is interested in fostering: that is, gamers who bought and own legitimate copies of Halo games.
While it may be that there is overlap between purchasers of Halo and C&C Generals, there is no way to know that. In essence, the project is capitalizing on intellectual property Bungie developed, with absolutely no direct benefit to Bungie or Microsoft, and very little (if any) indirect benefit.
Once you throw in the idea of a separately developed Halo themed RTS game being developed internally, which Microsoft is also intending to use to promote the Xbox 360 as a platform for fans of RTS games, you have to recognize at least the potential for actual harm to the Halo franchise.
Bungie didn't want Halogen to be shut down, but it had to acknowledge Microsoft's legal right to do so.
Halogen didn't want to be shut down, but acknowledged Microsoft's right to do so. It is a shame that it was done so late, but so much of the work they did was not directly related to Halo that it will not go to waste. They knew, the entire three years they worked on the project, that this might happen.
What is becoming more of a shame in this is how people only tangentially related to Halo or Halogen feel the need to modify the story to suit their own particular ends; to suggest that Bungie was responsible for the closure (which they were not) to suggest that Bungie is somehow obligated to respond positively to every fan group request for approval to make Halo mods for other games (they are not), and to suggest that Bungie gave prior approval for such mods to the Halogen group or any other such group (they have not). To my knowledge, the only fan group creating contractually authorized derivative content from the Halo universe is Rooster Teeth with Red vs Blue, which I think is unlikely to be competing with any Microsoft product in the near future unless they open a machinima department.