Would it violate the TOS to install a third party hard drive? Is it a violation of apples terms of service to
  replace the factory installed hard drive with a larger third party
  one?


I understand that it is a violation of the terms of service to install OSX on non-apple hardware and I was wondering if installing a third party hard drive would be a violation. If so would I need to buy a first party hard drive directly from apple, or is it completely taboo to poke around inside an apple product?

Simply put can you replace the hard drive of an Apple laptop with a third party hard drive?
Done all the time. Apple does not make drives, so really all drives are non-Apple hardware.

The TOS restriction is targeted at complete clones - main board, case etc.

Various Apple models over the years have considered the drives to be user-replaceable - they just slide out without any tools. The pre-cylinder Mac Pro and XServes are good examples. Various laptop models made the drive very easy to change - one screw and it pops right out.