Are you kidding

I think I'm on my 6th or 7th Xbox now at this point (I used to have them break down on almost a semi-yearly basis). It's not Microsoft's fault for the "Restriction of Hazardous Substance Directive" that was implemented in July 2006 which forced all manufacturers
to use a crappier "lead-free solder" in their electronics devices. You just gotta suck it up, pay MS to fix your console (still cheaper than buying new) and still do everything by the TOU and COC to enjoy Microsoft's products.

I know have a Xbox 360 S 250GB and from what I'm hearing, that should last me a long time and (fingers crossed) I shouldn't need to buy a new one for quite a while.

Soo..... you modded your console unknowingly still counts as modding.

Knowitall, I did not Modify any part of my console, I replaced the DVD drive that runs the games, not the HDD. I'm on my third console (2 had died due to red ring of death)

Maybe they should have giving me a new XBOX instead of the faulty one they had given me. If they had I would not be in this postion now. I see it as if my home computers dvd drive stoped working, I would go out and get a new one. In this case MS told me
a new drive would be 150$ plus taxes, so instead I got a new drive for 20$

Please re-read:

From the Terms of Use:

12. Service Operation and Equipment.

Any attempt to disassemble, decompile, create derivative works of, reverse engineer, modify, further sublicense, distribute, or use for other purposes the Service, any game, application, or other content available or accessible through the Service, or any
hardware or software associated with the Service or with an original Xbox or Xbox 360 console is strictly prohibited and may result in cancellation of your account and/or your ability to access the Service, and the pursuit of other legal remedies by Microsoft.
Microsoft may take any legal action it deems appropriate against users who violate Microsoft's systems or network security, this contract or any additional terms incorporated or referenced in this contract, and such users may also incur criminal or civil
liability.

I would ask you to look up the very definition of the word "Modify." You would also have had to "Disassemble" the XBox itself to make said "Modification." Both of these actions contradict an contract you agreed to when you accepted the ToU and CoC. As
you have broken said contract, you must face the consequences.

The post I copied and pasted for your perusal was indeed dealing with a question about HDD replacement but only one with a narrow vision and the goal of trying to justify their actions would think that the same "Terms" wouldn't also apply to any other part
of the hardware. I didn't think it necessary to "replace" (or modify, see what I did there?) HDD with DVD Drive because anyone with half a brain can see the parallels between the two pieces of hardware.

I myself am on my second XBox. My first Launch week Xbox lasted five years before it finally went RROD. It was not "faulty" in any way, as you say. It had more hours of use on it than I ever expected it to provide me with. When it did finally die, it
was up to me as a consumer whether to get another one or not, not Microsofts responsibility to provide me with another because it was "faulty." I might also recommend that you seek out the definition of "Warranty" and what the length of said warranties is
in relation to most consumer electronics.

You may want to "see it" in the same light as replacing a home computers hardware, which is naive because there is no such agreement in place about replacement or changing/upgrading components in a home pc, but the two are not the same.

As for the price disparities, I'm fairly certain that installation of the $150 DVD Drive is included in that price, whereas the $20 drive does not. One must factor in the cost of installation, not being an overly technical person myself, I shudder to think
what I would have to pay a professional to do said installation.

Anyway, it's not that I don't feel empathy for you for the situation you find yourself in, it's just that one needs to stop for a second and really think about all the different angles of the situation.

Yep. Sorry to say but you HAVE modified your console. Nothing you can do about it except not do it in the future.