Where is the mirc default theme stored? I'd like to edit it.

Do you mean the color scheme? If so, press alt k. That will open the dialog so you can make the changes to your liking.

I believe they (all schemes in alt+k) are stored in the [palettes] section in the mirc.ini.

No, I mean the .mts or .xml file of the default theme so I can load and edit it with e.g. Theme Engine MX.

there isn't one

Any other way to edit the default the except through alt + k?

No. mIRC doesn't have any default "theme". The color schemes in Alt-K are the closest thing to a theme that mIRC uses. The only time you have a MTS theme is if you download one or create one. None come with mIRC.

If someone is getting kicked or banned i want to highlight it with e.g. red text and black background. possible?

/help Halting Default Text

As Collective indicated, you would need to halt the default text and display your own custom text in this situation.