Why would you even ask if you can work on a video game mod if it has nothing to do with your employer's business? You can do what you want with your own brain, on your own time, with your own equipment.
That's fair, but I'd simply ignore it. You will likely not be discovered working on a hobby project. If you are, nobody will even care enough to follow up. If they do follow up, you will likely get a "talking to" and still keep your job: a slap on the wrist. However, because you bothered to talk to their lawyers, you've now brought attention to yourself...