generic title...
There is one place where you can't do what you want with something you own and that's modifying a replica weapon (legal to own) into a weapon that can fire live ammunition. There are specific laws which govern this, however it does set a precedent for the law specifying what you can and can't do with what you own.
The issue with modifying your own hardware (which I believe is totally legal in the UK) is what you end up with. If you do it yourself for your own interest, fine. If you copy games that you don't own and use that on your modified hardware, not ok. If you provide a service modifying other people's hardware, for profit, enabling them to run copied software, also, not ok.
Like I said above though: If lots of people do this, it's likely that the cost of the hardware will go up, but maybe the royalty costs for the game producers and therefore the end user cost will go down...