First let me say nobody has been banned or even temp banned for rapidfire controllers.
However! I think cheating is technically against the Microsoft XBOX Live service terms of use. So you *could* get a temporary suspension or banning for cheating.
Don't believe any mod shop when they say their mods are "100% undetected". There's no such thing as a 100% undetectable mod (trust me, I would know).
My opinion? Microsoft is very busy combating piracy, and things like patched game discs and people hacking the hardware on their XBOX 360 consoles (I'm sure some of you have played in a COD:MW2 live match recently with the unlimited ammo glitch that ruins the game - this is from an XBOX 360 hack). Microsoft generally leaves anti-cheating up to each game developer. And game developers want you to buy their games. So they are more likely to try to release XBOX Live patches that will try to stop you from using rapidfire - but still let you play - they do this rather than banning you and losing your business.