If you are writing Java, then there are Java database implementations (Jared mentions hsqldb, there are others) that you can directly include.
SQLite is fine for static inclusion, however you can also include MySQL within your application if you're using a compatible language such as C.
I think you would appreciate having SQL available as well. XML files just don't cut it any longer, maybe a couple of years ago when writing PDA software, but even the iPhone and Android includes SQLite now.