I sell video games and consoles for a living, and probably repair about 20-30 of them each month.
Based on my experience, the reasons that Microsoft don't want you poking around in your Xbox when it's under warranty are completely valid.
For any console that hasn't been tampered with, the fault is almost always one of only two or three things that can be diagnosed nearly instantly and repaired in around 15-30 minutes with a near-100% success rate.
For a console that has been tampered with by an end-user, suddenly the list of things that could have gone wrong multiplies by an order of magnitude. The diagnostic procedure goes from a simple 1:1 mapping of symptom to fix to a broad tree of debugging steps. The total process can easily take multiple hours and end up nowhere, depending on how many YouTube videos and Reddit threads the previous owner followed blindly.
Of course, the consumer is not going to admit that they're an idiot who transformed their console from a simple fix to something that's beyond economic repair, so either Microsoft has to provide them with a brand new machine or they will face legal action/scathing reviews online.
Short of warranty stickers, what are Microsoft to do?