It should, but from my experience dealers will not cover it under warranty. Only bumper to bumper. The 1k price to fix it is standard from what I've heard. I'd definitely recommend providing the Zspeed unit as the piece they replace will be of the same crappy quality as the original.
I'd also recommend taking it to a different shop- the dealer is just going to rape you on P&L.
Also, if you haven't done it already, change out to a stainless steel clutch line and fill it with some DOT4 fluid and see if you get any response. It's a cheap and worthwhile upgrade regardless of the outcome.
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