I haven't actually researched this answer, so take it with a grain of salt. Basing it off of other development work I have done with MP3s in the past.
I do not think there would be any reason that Android would limit an application from reading the embedded lyrics (or, rather lyrics from the ID3 tag). Because the tag supports this, really all you would need is a Java library that you can bring into your Android app that will read the lyrics.
With that said, the lyrics tag tends to be a little more in the "advanced support" for many applications. Everybody reads the title and artist tags. Most people will even display the album art (which is also part of the ID3). I haven't researched any recent libraries, but if you are curious about the ID3 tag in general, read this ID3 Easy article.
So, the short answer is: no, nothing is stopping anybody from supporting it other than library support. Either a library doesn't exist, or nobody cares to utilize that feature within an Android media player.
Hope that helps!