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
The above is my translation.
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.