Can we add our own java libraries to be used within Android?
Yes and sort of.
Android supports incorporating third-party JARs into Android apps. However, those JARs might assume they are on JavaSE (or, worse, JavaME) and therefore be missing some important APIs.
Also, you will have some problems if the JAR was compiled using older Java (e.g., 1.4.2) or non-Sun Java (e.g., gcj). If the source is available, I recommend recompiling the code using the same compiler that you would use for your Android app.