I was under the impression that with flexi flares you would have been ok as long as all of tyre is under flare. I have heard of the 50mm max wheel track increase. Are you running a zero offset on your rims,as this will give you an extra 80mm overall.
Im also abit surprised they said it looked to high when you look at new hiluxes and mitsi tritons that are getting around. On side of the road I would have just said its had a legal 2 inch lift and tried to leave it at that, problem is they get you for something obvious, in your case no mudflaps and then the pits can sort out the nitty gritty.
I guess luck can play a part to,I once had cops follow me from wedge island to gingin ,sat right up my arse the whole way and didnt pull me over with a missing mudflap staring them in the face. Mustve had something better to do.
Did the pits measure anything or just go by eye?
Did they check if your vehicle came out with air bags when they were looking at body lift?