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I was getting that "Steam needs to be online to update, but was set to offline mode" error all of the time. And here is the solution if anyone is still interested:
I have Windows 7, so my Users file didn't have Library in it, but I found a way to solve that one too:
"windows key + r, then type "regedit" using the folders that pop up, navigate to:
"HKEY_CURRENT_USER/Software/Valve/Steam" then double click the offline option that will appear on the right, and set the value to 0" This was posted on Youtube by 'matt123337' on a video about the issue on MAC.
For MAC
For Lion you have to make Library folder visible, because it is hidden or something like that.
Hope this helps, else just let it die (and sorry for making another post about this).
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