The current Lions are all-square at 1-1 against Australia ahead of Saturday's decider in Sydney, but this week's build-up has been marred by the non-selection of talismanic Irish centre Brian O'Driscoll.
O'Driscoll, on his fourth Lions tour, had been considered a leading candidate for the captaincy after Sam Warburton was ruled out through injury, but despite starting the previous two Test matches, he hasn't made Gatland's squad.
Dallaglio though, believes Gatland's men have bigger issues to focus on if they are to emerge successful in Sydney - and he is backing them to do just that.
"It will be tough and momentum seems to have shifted with Australia," said the former no.8.
"The series has lived up to all the expectations and has gone down to the wire in both games but I have no doubt that, from a Lions perspective, we can be on the right end of the result this weekend.
"There is a lot of controversy over the team selection because clearly by not selecting Brian O'Driscoll it has effectively ended his Lions career.
"But I'm sure if you asked him before the Lions tour started that he'd be playing in two Lions Test matches he'd have been very happy with that.
"I think the Lions issues are much more closer related to the forwards and that's where they need to do the business this weekend if they have got any chance of winning.
"It will be tight. I'm a man of confidence and I believe they can win their first Lions series for 16 years."
PLEASE LEAVE IN FINAL PAR - Dallaglio was speaking ahead of the J.P.Morgan Premiership Rugby 7s which kicks off on August 1 at Kingsholm with rounds at Franklin's Gardens and Allianz Park and the final at The Rec.