I'm not sure what is the catch, however, I've been using it for awhile now, and I haven't experienced any issues or fees .
How is this service funded? Do you mean how you as a client can fund your wallet? Best to see their site: https://www.vcpay.co.za/depositFUNDS.aspx
Oh, I'm not sure. They do encourage to you pay your bills/buy airtime via EasyPay (using those virtual cards). Maybe they get a cut from the bill providers, etc telkom. If you pay your bill via EasyPay, they get 2% back or something like this.
is it possible to purchase products through steam with VCpay?
Yes you should be able to. If you have a problem I suggest you phone their call centre. They will usually get back to you within the day.