Ask the service manager to give you a detailed explanation, in writing, of why and how the lift and tires caused the failure. Keep asking questions, when he says the bigger tires put more stress on the t-case, ask him in what way, make him explain the physics involved.. When he says the lift caused unacceptable u-joint angles, ask him what is the maximum angle a Spicer u-joint can be operated at (and then go to Spicer to find out what is the maximum angle).
The point is, keep harassing him (but always be polite and courteous), make him put everything in writing, make him write you a book about the reason's for denial.
Do not threaten legal action unles you are prepared to go through with it. I read somewhere a few years ago that once the customer threaten's legal action, the dealership is advised to cease all communication with the customer and get their lawyers involved.
Don't back down too quick, keep challenging them. If they say something like they were advised by DC not to cover modified vehicles, tell him you want to see a copy of the correspondence from DC. If you keep asking for more and more details, the SM may just change his mind and cover it just to get rid of you.
I would keep it at the same dealer ond try a bit harder before taking it away. As Bill said, it is a waste of time taking it to another dealer once it's denied warranty.
In a nutshell, just become the biggest pain in the arse he has to deal with, but as always, remain polite. You don't want to give him a reason to refuse dealing with you. And always insist on talking to the same person, don't let them pass you around to different people.
Good luck.
Vince