How should Black defend against the Steinitz attack? [FEN ""]
1. e4 e6 2. e5


This line of attack seems to break so many opening theory principles (don't move same piece twice, don't overextend, develop minor pieces ASAP) that I am surprised it's not immediately punishable.
How should Black defend against the Steinitz attack? This line of attack seems to break so many opening theory principles (don't move same piece twice, don't overextend, develop minor pieces ASAP) that I am surprised it's not immediately punishable.


Why should you defend, at the first place?? All of your observations are correct, so we can conclude that e5 is a bad move. Black is better here, but the only reason you do not see a question mark behind this move are following facts:


Pawn at e5 is White's only weakness;
Black has no open lines or diagonals that can be used to attack the e5 pawn;
White can defend e5 pawn with d4 which means that black will have to attack it with d6/f6 at some point-this will give White the chance to get himself rid of his ONLY weakness by exchanging it. 
No matter how Black reacts, White will still have small spatial edge-e5+d4 pawn chain vs e6+d5 pawn chain, or d4 pawn vs e6+c6 pawns. For better understanding of these middle-games consult book Andrew Soltis-Pawn Structure Chess;


Still, Black can gain his fair amount of space in the center and equalize gradually like in any other viable semi-open game.

Since White played twice with a pawn and has overextended himself, the best would be for us to continue developing using initiative against e5 pawn to get tempo.

Below are the variations that demonstrate what I have stated so far:

[fen ""]

1.e4 e6 2.e5 Nc6!? ( 2...d6!? ) 3.d4 d6 4.exd6 ( 4.Nf3 dxe5! 5.dxe5 ( 5.Nxe5? Qxd4 6.Nxc6 Qxd1+ ) Qxd1+=) ( 4.f4? dxe5! 5.dxe5 Qxd1+ ) ( 4.Bb5?! Bd7 5.exd6 ( 5.Nf3 dxe5 6.Nxe5? Nxe5! 7.Bxd7+ Nxd7-+ ) Bxd6= ) Bxd6 5.Nf3 ( 5.Qg4?! Nf6! 6.Qxg7 Rg8 7.Qh6 Nxd4 8.Bd3 e5 9.Bg5!? ( 9.Bxh7? Rh8!-+ 10.Bg5 Rxh7 11.Qxh7 Nxh7 12.Bxd8 Nxc2+ 13.Kd1 Nxa1! 14.Bh4 Bf5-+ ) 9...Ng4! 10.Bxd8 ( 10.Qxh7?? Qxg5-+ ) Nxh6 11.Bh4 ( 11.Bxh7?? Rh8-+ ) Bf5-+ ) Nge7 6.Bd3 e5 7.dxe5 Nxe5=


I was trying to find this line and the only thing I found was a main line from above, given by Lev Psakhis. His line starts with 2...d6 and transposes to the main line given above. The move 5.Qg4 shows my own analysis, since it was not mentioned anywhere but I believe it can be tricky. Notice the traps that I have shown in the above sidelines-they can be very useful to you during play. Also, notice how in time Black frees himself from Whites small spatial advantage and equalizes.

If you do not like these you can always transpose into normal French defense with 2...d5 and 2...c5 is also viable here.

If you have further questions leave a comment and I will reply as soon as I can. Hopefully this answer helped you.

Best regards.