In most states body lifts are unlawful so check with your local community law enforcement agency. I would always lean more toward a bolt on lift kit, however you might be satisfied with the stance of your truck with just addling 2" leveling blocks to the tops of your struts on the front, if you were going to do a lift again bolt on no drilling is best also stay away from rear kits that use blocks mounted between the rear leaf spring and the top of the axle these types of lifts are cheap but have issues like axle wrap and wheel hop when you unleash the furry!! so I would look for the rear lift in a new spring pack this could also increase your towing capacity! so in short you might want to find a local spring shop and see if they would build you a new set of rear springs (on the cheap) and order some leveling blocks for the front!
i was just looking yesterday for some lift upgrades. found online at JC Whitney or one of the other ones that you can get an add-on leaf spring for the rear. it will give you about 2" of lift in the rear and add about 800 to 1000 # of load capability. it wasn't expensive at all. you can get an entire spring set to replace what you have for about $300. for the front you can get the bolt-on blocks to level it up. i'm planning on getting the kits. i've heard that they are not quite as easy to install as advertised. since i have to get the shocks replaced on my 2006 2WD SLT, i'm going to ask my mechanic if he can just add this stuff on in the process. i think the price will be justified by the ease of having a professional do the job.
you can check online about your state's qualifications for height. for my dakota in FL, the front max. is 28" and the rear is 32". with the kits above, i will have no problem with those restrictions.
ok so just did the lift on my 05' Dak. its pretty much a mix n match. i took a 2" leveling kit from Daystar, and a 2" add a leaf kit from FatBobsgarage.com (their customer and technical service is awesome btw) i was able to fit my 31.5's under after the lift, i can say that going any larger your gonna need to get wheel spacers or different rims with a more negative offset to keep from rubbing your frame on tight turning. the ride quality is just as good as was stock
Usually a suspension lift is the most desired type of lift. However when you own a truck with a complex independent front suspension which is usually expensive to lift to begin with, and theres very little aftermarket support for the Dakota in general, a body lift looks better and better. You may even want to consider both types if you want as much lift as possible
Our year Dakota's don't have suspension lifts available yet (except for an exorbitant price on jackmyride.com). Your only choice seems like an air lift kit or a body lift/leveling kit. Performance Accessories makes a 3" or 5" body lift kit for our generation of Dakotas. I have heard that anything above 3" is asking for trouble i.e. cutting fan shrouds and lengthening brake lines as well as potentially messing up geometry.
I am going to buy a 3" body lift kit this summer though. I believe it is the best bet and great for the money (~$280 on Amazon)
P.S. I fit 265/70r17s (~32") before any kind of lift with minor trimming