1- YOU agreed to their Terms of Service. Self repairs are forbidden on their equipment. And no, you don't own the intellectual property inside the console, they do.
2- They don't do any repairs to any console that has been tampered/opened by anyone other than themselves because they do not know what was done to it.
3-Contact phone support about your money.
4-Just an FYI, if you decide to have someone else, other than MS, repair the console then you should know that in just about all the cases involving self repair the console will be permanently banned from XBL. Your only recourse now is to purchase a new one.