CD copy protection schemes (including the requirement of putting the CD in the drive even though the files are on your HDD) are generally put in at the insistence of THE PUBLISHER. In this case, Vivendi.
I was on a rooftop.
I could hear enemies (keeping this spoiler free if I can) climbing up to my location. They scared me. (Cus they're freakin' EVIL and I was already hurt ok?!) So I ran inside and shut the door thinking I'd be safe. (These enemies didn't seem to open doors unlike some...
It's in the registry.
You'll have to go to HKCU -> Software -> Valve -> Source -> HL2 -> Settings
There is a width and a height. (Try 640 for width and 480 for height. You can then change it to whatever in the game.)
I don't think you'll be able to play until you get the files correctly installed. Valve has suggested deleting the models .gcf cache file and re-downloading it. I got around the problem by copying the steam folder from another of my computers.