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Currently, in the autogen.sh script we check whether .git is an existing directory in which case bootstrap is run. However, if libvirt is a submodule, then the .git is just a file (with reference to the topmost .git directory). However, our submodule routines work well. So there's no real reason why we should prohibit users to build libvirt from submodule.
LibVirt : simple API for virtualization
Libvirt is a C toolkit to interact with the virtualization capabilities
of recent versions of Linux (and other OSes). It is free software
available under the GNU Lesser General Public License. Virtualization of
the Linux Operating System means the ability to run multiple instances of
Operating Systems concurrently on a single hardware system where the basic
resources are driven by a Linux instance. The library aim at providing
long term stable C API initially for the Xen paravirtualization but
should be able to integrate other virtualization mechanisms if needed.
Daniel Veillard <veillard@redhat.com>