I assume there's something in their terms of service about not poking around in private repos and using the code even for internal purposes except for necessary maintenance like backups, court orders, etc.

I am not a lawyer but I also assume Microsoft's position, at least in part, is that they can download and use code in GitHub public repos just like anyone else can and developing a public service based on training with that (and a lot of other) code isn't redistributing that code.