1) utilise a true local database engine,
2) one that sported DDL/DML,
3) one that could be indexed locally,
4) one where the system could use macro substution,
5) and on the fly code execution,
6) and in-line SQL,
7) and in-memory cursors would auto-span to disk when required


First, a client isn't very unlikely to ask for these characteristics.

They are, however, more likely to ask for the ability to run on a mobile device, and for the application to continue executing subsequent lines of code without waiting for function calls to complete.

But regardless, several of the things you described can be done under the terms of what I've agreed to (VS.NET 2005 and SQL Server)

Kevin