Correct. "Gas" (some amount of Eth set aside for fees) covers the cost of running the contract, so you're free to run a non halting program - the EVM will happily accept however much gas you set aside and continue chugging along.
This isn't the first time PoS has been used to secure a coin, either. (With the number of altcoins out there that's not even surprising). Eth shifting to it would just represent the first major coin to use it.
This hack sidesteps the halting program entirely. Now, we can not know if a program can halt with a theoretical unlimited ether, but as there's no unlimited ether, all programs will halt.