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Yes you an strip the DRM, yes you can convert the ePub. Yes you can use the mobi directly with the DRM stripped.
But if you don't strip DRM and/or convert then the answer is no, the Kindle cannoe handle library eBooks.
My mother has a friend who has some version Kindle and her friend asked about library eBooks. Given that she doesn't know about DRM, stripping, converting and doesn't have someone to do it, the answer is no. This is not uncommon. People buy a Kindle and then find out about library eBooks and find out they cannot take advantage of them.
I know most people here are tech savvy enough to figure this out, but there are a lot more people out there who are not tech savvy enough to do this and so the answer for them is no.
And out of the box, the answer is still no.
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