first you set it up replacing my email with yours.
you don't need any wad files in teh steam folders, they are already there in the gcf, you don't need to unpack the gcf unless you don't have any wad's you need form there, or the models etc, but you can get models from other places too (www.doenerking.de)
you need hammer 3.4 first, then drag and drop the 3.5b.exe over the 3.4.exe.
set up hammer with ONLY the hammer 3.5b fgd you get from VERC
i'd advise putting all your wads in a folder in C:/Program Files/Valve Hammer Editor/(wads)
cs looks for the wad's in
counter-strike/cstrike, so if you're not wadincluding you need to place them there (halflfe.wad and cstrike.wad and cs_bdog.wad are already there.
use batch compiler (zhlt) to compile and include teh wad with the bsp.