I think you're missing a very important point: If you're sitting around the table, passing the rulebook around, you still only have a single copy of the rules that you paid for. If everyone is sitting in their own home, and you've got the only copy of the rulebook, and share it with them online, you have to make a copy of the parts you're sharing. While I do believe that there needs to be some grey area (consider the situation where you use the rules for "back-end" decision handling without the players involvement, but the players are effectively playing a mechanic-less story), if you're having them use the mechanics, ESPECIALLY on a public server where you don't personally know all of the other people to potentially share the rules in person, it's a valid question. And while Steve may be a little overprotective of his IP on occasion, he's also earned some of that based on his experiences with various situations, and you can't really fault him from actively protecting his own interests.
Think about it from another perspective - if you and a bunch of friends want to all play WoW together online, and only one or two of you bought the game, would you think it was unfair that the rest of your group was required to buy a copy for themselves? I know it's not exactly the same, but it does make a reasonable parallel (including the fact that if your friends are there with you, you can use your copy to show them the game and even let them play it without violating any copyrights...).