Developing a client application, want the entire DB to become embed within the software or in one stand alone dll (ie sqlite), not something similar to mysql.

What is included in XE2 which may work 'out from the box' and never need thirdparty tools?

Apart from TClientDataSet / xml files :)

Firebird can be obtained with XE2... For any single user usage, you don't have to operate a plan to can get on (but you will need the firebird client and also the vendor dll to gain access to it).

You should use my SQLite wrapper (also more info during my blog) which assists multiple platforms. In Home windows you will need to deploy sqlite3.dll together with your application, there's no requirement for this on OSX. You will get sources in the svn. Example usage:

uses
  SQLiteTable3,
  {$IFDEF DELPHI16_UP}
  System.SysUtils;
  {$ELSE}
  SysUtils;
  {$ENDIF}

procedure Demo;
var
  slDBpath: string;
  db: TSQLiteDatabase;
  pstm TSQLitePreparedStatement;
begin
  slDBpath := IncludeTrailingPathDelimiter(GetHomePath) + 'test.db';
  db := TSQLiteDatabase.Create(slDBpath);
  try
    if db.TableExists('testtable') then
    begin
      pstm := TSQLitePreparedStatement.Create(db,
        'insert into testtable (name,number) values (?,?)',  //sql statement
        ['NewRec', 99.99]); //parameter values
      try
        pstm.ExecSQL;
      finally
        pstm.Free;
      end;
    end;

  finally
    db.Free;
  end;
end;

You also may take a look at NexusDB Embedded, that is native Delphi solution, and does not require any Dlls.