It said it was delayed by a year before the hack.

In what way? How could that make sense?

Why would the leak cause major portions of the engine to need to be rewritten?

Seems more likely that it was a convenient excuse.

it was used as an excuse, the real reason is that Valve is REALLY slow at developing games.

I wouldn't say they're slow. You wouldn't believe the rate they're adding features to Dota 2, for example. I believe that they're actually quite a small crew with very ambitious projects, and they tend to move around a lot.

Major parts needed rewrite to not make it so easy to develop cheats for the game.

If the hackers would have the source, they would not even need to reverse engineer the engine to build their aimbots/wallhacks.

That does make zero sense.

It was a fear years ago when Quake was open sourced [1]. In Valve's case, the programmers probably had to audit all the source code in order to reduce possible exploits.

[1] http://www.bluesnews.com/cgi-bin/finger.pl?id=1&time=1999122...

I don't know. Ask gaben.

The bigger issue was that (IIRC) the source for Steam, which wasn't yet launched, was also leaked.