Here is a solution for anyone interested. Seems hooking the internal call to GetVolumeInformation (as suggested in comments) was the right way to go. I've compiled a dll file which I made available [on github][1]. All you need to do is inject the file into Steam.exe and steam will no longer bug you about FAT drives. This should also work for all future releases of the steam client... Hope it helps somebody! [1]: https://github.com/CamxxCore/SteamPatch

Here is a solution for anyone interested. Seems hooking the internal call to GetVolumeInformation (as suggested in comments) was the right way to go. It appears that steam just checks if the returned filesystem name contains the string "FAT" which would explain why exFAT drives are also affected by this:

Anyway, I've compiled a dll file which I made available on github. All you need to do is inject the file into Steam.exe and steam will no longer bug you about FAT drives. This should also work for all future releases of the steam client... Hope it helps somebody!