Yes, they do.
I bought a used XBox 360 that unbeknownst to me had been repaired by the previous owner (they did some kind of RROD fix involving washers instead of the X-Brace that holds the heat sink in).
After a few months, it eventually developed the RROD, so I sent it to Microsoft for repair. Prior to sending it to Microsoft, I could play a game for a couple of minutes before the console died and gave me the RRoD.
After they received it, they quickly flagged my work order as an exception for hardware tampering. I was surprised to learn of this, since the seal was intact. Microsoft then sent it back to me, except that now it wasn't even bootable. When I turned it on, the lights would alternate between red and green (half red, half green). The screen showed an E49 error. Basically, it was bricked for being modified.
I don't know what happened while Microsoft had it, but I'm figuring it was one of the following.
* The only tampering done to my box was the RRoD repair. Nevertheless, Microsoft plays it safe by nuking any boxes where they detect tampering, as it's possible the DRM has been defeated using an undiscovered new method. Maybe their policy is to nuke boxes whenever they detect tampering?
* Possibly my XBox actually had been modded to play pirated games. Somehow it survived several console updates without a console ban, but maybe that was coming eventually. Microsoft nuked it.
In any case, when I explained the situation to them, that I had sent a semi-working XBox 360 to them and got a dead one back, they politely told me to pound sand.