Well I notice that Steam has no qualms with downloading a Steam update while being set to Offline mode.
Well, that may well be. I don't keep Steam offline so I honestly wouldn't know, myself.
I would prefer if it was a cost of doing business.

But it isn't; it would only be a cost of doing business of a fairly small slice of the computer gamer market. I'll Google around to see if I can find out what percentage of the country only has dialup as a means of getting on the internet.
What I hear is that there is a sizable chunk missing from the disc (on purpose); this requires an online connection to retrieve, and complete the install.
That might be, but so long as it isn't huge, you could install the bulk of the game quickly via the CD and then download that final bit online, meaning you wouldn't need much online time for the purpose.
ISP cd's can contain a dialer for an 800 number to facilitate ordering DSL or cable from the ISP's website.
Didn't know anybody did things that way these days. I've had cable internet for years now, and I always just called the cable company to come out for an install.
Steam could easily do the same for the cost of an 800 number, and at the same time offer a bandwith-lite authentication server. Anyone restricted to Dial-up would not be buying a lot from Steam, but then anyone using the connection is a customer that otherwise would not have spent money with them but did.

Also this would mean that any Steam subscriber could use their game on a Dialup only PC in rural America.
Well, I suppose it might be a fairly low-cost option, I'm just figuring they aren't likely to put forth the effort for what isn't likely to be a large percentage of their potential market anyway.
Its not so much of a minority as you may think. DSL has a practical limit of 18,000 feet from the last switch of the ISP's. Often Cable companies won't run cable down a rural highway ~and everyone there has DishTV or the like.
I'll look and see about the numbers.
Its not a practical option to haul a PC to the public library, and gaming at Starbucks would cost more than $40 a month (not counting gasoline and travel to and from cutting a chunk from your leisure time).

Oh, I'm not talking about going down there regularly to play, I'm just talking about getting the game authenticated.
Also, in other news, I closed Steam, turned off the WiFi, and started Steam again. It reported I had no internet connection, and gave me the option to start in offiline mode. I did so and both Supreme Commander 2 and Skyrim started with no problems.
I'll try turning off the WiFi switch, rebooting and then seeing Steam's reaction.