First off I have posted the finished product in downloads, so you can download it if you want. Here is the link:
http://www.snarkpit.net/index.php?s=forums&f=7&t=12327

It is actually relatively simple to create the effect. I think the fog would look best outside so you should have sky and a light_spot set to: is sky, yes.

The following strips should be done with the texture: fade2 (if the texture doesn't look right you may need to select it, push shift+a and click on fit under where it says justify)

After you built your room with sky then make strips vertically through your room, and make them 64 units thick.

After you fill those in then do the same thing with the strips but this time make them horizontally, as to make crisscrosses.

Now that your fade textures are in place select them all and make them into func_illusionary. (after selecting them push ctrl+t and select func_illsionary)

Then set the render mode to Additive with an FX amount of 60. You can experiment with the FX amount if you like something else better.

If you followed these steps successfully you should have some amazingly realistic fog for Half-Life. it does look better in game. It is hard to capture the effect of walking through it in a snapshot.