Fallout is theirs, we work with it's lore and all else. Also I've never wrote that it's illegal to mod a game. Though, if you check out the copyright statements in the original manuals (and probably where it's written elsewhere), there is written that you are not allowed to modify and release any files (which is something that every Fallout 2 modder has done by now, so it doesn't matter anyway. But it's still there).
Yes, the setting is Bethesdas, Not the original Games.
I was mistaken about it being a mod, I was under the impression that since it used the critter.dat and master.dat it was, Because like all other fallout 2 mods, Those files are needed.