Does the license define anywhere what "embedded" is supposed to mean in that context? If it doesn't we should abide by what we understand with "embedded", and for me "embedded" does not mean unextratable/unusable, but I'm not a lawyer, not even a native English speaker
By the way the IDPF "specification" cited above is not exactly for encryption, but obfuscation. That results in font files that are not trivially extractable and usable from the .epub file, but any user interested in doing it can do it (as reading software should). I don't know if there is any software (other than maybe ADE) that supports this method.