Welcome to the SDK. I heard Source SDK is chock full of problems (too many updates that screw it up or something).
Lies.
I'm aware of what the SDK is, I've actually used it before, but it just never felt right.
You're used to Hammer 3.5; it's not going to feel 'right' until you start using it
It's really not as extreme of a technology leap as you're making it out to be; if you want to experience something like that then maybe you should try making a Doom3 or Unreal mod or something.
Really, it's easy to setup a configuration for HL:S. Open up Hammer in any configuration (HL2, HL2DM, whatever), go to options, game configurations. Click on 'edit' and then 'add' and type in HL:S or whatever you want your configuration to be called. Under 'game data files' you need to 'add' and browse to the location of the HL:S FGD file. You can leave the next several fields alone although you may want to change default texture to 1 (because HL:S textures are low-resolution compared to HL2/other source games and don't need to be scaled to 1/4). Then you need to find the correct game paths in your \steamapps directory and point Hammer to them - Game executable directory should point to the directory containing hl2.exe (so it's probably steamapps\yourusername\half-life source), Game directory needs to point to the directory that contains a gameinfo.txt for HL:S (it's probably in steamapps\yourusername\half-life source\valve or something). You can leave the default VMF directory alone, it's just where it will prompt you to save maps by default.
Really, you don't have to do any back-breaking work; the gameinfo will tell Hammer which .gcf files it needs to load content from, so you can work with all the HL:S assets.
If you receive an error while opening up Hammer with any config to create a new one (like with HL2DM as you mentioned) then you need to do a 'refresh game content' and 'reset game configurations' through the Source SDK first.
Ninja defuse, you really shouldn't hijack other people's threads, but there's no way to change UI elements like that without modifying hammer itself.