For the first question--can Yang Guo with HIS defeat a Great (other than Qiu Qianren and GWM), I would say unlikely, but there is a small chance in my mind that he might.
For the second question, their reaction to it, in ROCH chapter 38, it is mentioned that Golden Wheel Monk, out of honor, withdrew his weapon when he saw his opponent (Zhou Botong) approach barehanded. This means the honorable and respectful thing to do is to use the same magnitude of weapons as your opponent, and conversely, it would not be honorable to use more weapons than your opponent.
Therefore, if Yang Guo defeated a Great with the HIS, and the Great did not dismiss Yang Guo's victory on the basis of overemployment of weapon, it's probably because they have too much pride to protest. For example, in DGSD, Duan Yanqing refused to protest Duan Yu's disruption of his contest with the Yellow Eyebrowed Monk, in which Duan Yanqing was about to win, but ultimately lost due to Duan Yu's interference. Due to his pride, Duan Yanqing simply walked away accepting the defeat.