After shutting down the rts mod however, Microsoft said a game is, no pun intended, fair game as long as the maker doesn't profit. many people thought it was an ass move because they shut down a fan game then said it was alright to make one. Then Halo Wars was announced and every one was like "ooooooh... I see..."No, this is simply not true. If a group of fans creates something themselves that violates copyright law and distributes it freely either though youtube or some other means, the IP holders have full legal rights to shut them down.
The idea that something is not subject to copyright law because simply because its made and distributed freely is a myth that's been perpetuated by the fact that many companies today, not wanting to go to war with their own fanbase, choose to turn a blind eye to these productions and NOT exercise these rights.
Once again, there is a large and vast amount of legal precedent for companies shutting down fan works. Nintendo and squaresoft/square enix have shut down dozens of total conversions based on their IP's over the years. The Tolkien estate has shut down various mods for morrowind and/or oblivion.
On the flipside, Lucasarts/lucasfilm has pretty much given free reign to fans to make whatever they want in the Star Wars universe (something I still feel fans have never fully appreciated).
Microsoft can and HAS shut down at least 1 total conversion for an RTS. That may have been simply because Halo Wars was in production, and they might be cool with other fan based total conversions (they're certainly cool with other kinds of fanworks thankfully), but they do have a history of shutting these things down.