I once heard that Rav Moshe Feinstein forbade eating veal due to Tzar Balei Chayim. Is it true? If yes, is anything different in the way veal is farm raised nowdays?
Igros Moshe Even HaEzer IV: 92:2 The main quote is
עכ"פ חזינן שלא כל דבר רשאי האדם לעשות בבבהמות שמצער אותם אף שהוא להרויח מזה אלא דבר שהוא הנאת האדם ממש כשחיטת הבהמות לאכילה ולעבוד בהם וכדומה
In any case, we see that nothing is proper for a person to do to animals that causes them pain even if it causes a profit except for something that benefits the person directly such as slaughtering for food or using them to work or something similar
The above is my translation.
The question Rabbi Feinstein was addressing referred to whether it was ethical to raise veal. The veal raising process consists of taking young calves (8 months old- they are babies), limiting their movements (they are raised in stalls that do not allow much space if any to move about) and deliberately feeding them a milk-based diet that contains little to no iron in order for the meat to acquire a beautiful white tinge. The lack of iron leads to anemia which can damage the immune system and cause the calves to feel sick.
Rabbi Feinstein came out against this practice, citing (among other issues) that it did not actually improve the quality of the meat but only made the meat appear to be 'prettier' due to the white tinge.
Rav Moshe in this teshuvah is not dealing with whether or not the animal is kosher, but with the question as to whether the animal may be raised under these circumstances. Since this does not actually improve the meat (Rav Moshe says it is appearance only), then it is forbidden to do so. On the other hand if the animal is kosher after slaughter, then it would be edible. The isur of tza'ar ba'alei chaim would not affect the kashrus.
Regarding current practice, here is an article that lists the different types of veal and raises the issue of how they are treated. Note that some types are carefully treated to avoid the problem. Here is an article with more information about current veal production practices.