I bought the counter strike source a few years ago, and just found it, so is it possible that I can use it in Garry’s Mod which runs through Steam?
You mean like a retail disc?
If so, then yeah, you should just be able to install it and then mount it in-game.
Exactly, but it seems G-Mod isn’t detecting it. Do I need to put it in the Steam directory?
Use the CD key you got with the game to add it to your steam account. Open Steam, click “Games” at the top, and then click “Activate a product on Steam.” Then, enter your CD key and it should start downloading the game. Then you can mount it in Garry’s Mod
If that doesn’t work, contact Valve through Steam Support, and they can get you an updated key so long as you meet their requirements (a picture of the game disc, I believe).