So I stop by the LBS and ask them about the cost for installing my MIIV exhaust and he told me that it would void my warranty???

Have done upgrades numerous time on my other bikes and never voided it so why is it different with Ducati?

Your aftermarket exhaust would not be covered by warranty, which I'm sure you already know.  The rest of the bike would be covered by warranty as long as the exhaust isn't responsible for the failure, for example, if the exhaust created a lean running condition that was responsible for engine failure.

That's what I thought but this mechanic made it sound like the warranty is totally voided if it's install.  I can't believe that.

Show your mechanic this:

http://en.wikipedia.org/wiki/Magnuson%E2%80%93Moss_Warranty_Act

Probably a fight you want to avoid, so I would suggest, if the mechanic still shows resistance, find another dealer