I haven't played GTA mainly because it just doesn't appeal to me, however, the "Hot Coffee" mod is really just accessing a part of the game that wasn't supposed to be publicly available. It's like accessing the glitchy Hidden Palace Zone in Sonic 2 Final with a Game Genie. It's in the code as a leftover of development, but wasn't supposed to be accessable.
The assumption is that some programmers were having a good time messing around, and it accidentally got left in the data on the CDs that shipped. It wasn't hackers making their own content, it was just someone finding something in the game that they weren't supposed to be able to. It's not the modder's fault for finding something that Rockstar left in the game. It would be as if it's the Game Genie's fault for finding Hidden Palace. It's perfectly legal to alter the game code to open up areas that are included in the game. The reality is that Rockstar should have cleaned all of that data out before releasing the product, and they didn't think about the fact that it would be able to be hacked out of the game.
When the modders found out, they thought it was cool and released it. Public outcry ensued, and stupid grandmothers everywhere who bought GTA:SA for their 14 year old grandsons sued for damages. While the public outcry is majorly overblown, the fact of the matter is that Rockstar screwed up badly, and they deserve anything they get, which in reality will be an increased amount of sales of the game because of the publicity. Really, they aren't going to lose any money on this at all. Hold on to your old version, it will probably become a collectable ^_~