FWD cars do nothing but understeer, understeer in snow is not a desirable thing in my book.

I'd rather have the car go sideways than straight on at a turn.

Maybe I'm missing something.

 

You are over thinking it. STABILITY in snow is what you want. you REALLY have to understand the concepts of open and locked differentials, torque splitting, torque vs. rotational speed, etc. before you can see the big picture.

If you put your car in SNOW mode, then go around a 180 degree curve as fast as you can, then turn TARMAC on and do the same thing, you will find that you go around it faster and in a tighter turn radius in TARMAC mode, hence you will experience understeer in SNOW mode. Now go around that same curve with snow covering the road and repeat the test. What you are going to see is that, although traction is limited in both modes, when in SNOW mode you have more "control", the car is more stable, and you hold a better line due to relative wheel speed differences being limited(limited slip) from front to rear. This allows you to get more torque to the ground. In TARMAC mode on snow, as soon as you turn the steering wheel the diff unlocks, giving you an open diff situation which plays havoc on your lateral traction in the very "traction limited" environment of snow. As your wheels start to spin the torque output drops to virtually nothing, (remember that with open diffs the wheel or set of wheels with the LEAST amount of traction determine the maximum torque output possible) which won't get you very far. In SNOW mode on snow, the locking action ensures that the front and the rear both have access to all the torque coming through the center diff ( at least until it overpowers the ACD clutch discs, which is another lesson) and it is that torque that keeps you moving forward.

Still a little simplified but we are getting closer to the meat and potatoes. Someone with some physics background and knowledge of differentials could expand on this.

 

^ finally someone put in a way that actually makes sense.