While I was eating a bagel, I had an epiphany. What if a developer took Interstellar Army Simulator and made it into an actual game, and sold it for money, and then developed Chapter Master as a free to download mod for the Interstellar Army Simulator game? The developer wouldn't be making any money directly from Chapter Master, and as Chapter Master would be an unofficial free mod for the paid game, it wouldn't be violating any copyright laws. But because Interstellar Army Simulator would be making money the developer would be compensated for their work on Chapter Master!
That's not how copyright law works unfortunately - It's not the 'free or paid' bit which is a problem. The problem is using any assets or trademarks without permission, it doesn't matter if you do it for profit or not.
Obviously, if you start charging for something which uses those assets/trademarks it gets a lot more serious as you've directly made earnings off those trademarks (and then they could sue you for loss of potential earnings), but you're still violating copyright law by using those assets in any capacity. In this particular scenario though, you are right that the most GW could do would be to ask for the CM mod to be taken down - they couldn't take any action against IAS itself.
As, if IAS was made without any mention to any of the trademarks and without using any of the GW assets, there's not a single thing in any possible universe they could do. If someone else then decided to make a chapter master mod, or a dune mod, or a star trek mod, it would only be those mods and their creators that would be at risk of a C&D.