I need to perform some xml parsing using a machine that I may not have permission to install libraries in.  So is it possible to include a python library like lxml with my source?
For pure python libraries, you can do that. Unfortunately, lxml depends on a bunch of compiled  c code, so it's not going to be generally portable in the way you want.
Using virtualenv is a good alternative, since it helps isolate a project and the installed files. For lxml to work, you'll need the libraries necessary to compile code, which your system may not contain.
Is it possible to include a library like lxml without installing it?