If you are concerned about your work being copied by a gift recipient, you could use something like this to apply your own DRM to your pdf.
http://www.armjisoft.com/?page=pdfownerguard
It depends upon the author's relationship with the recipient Ken.
I have, in the past, given away digital editions of my work as competition prizes, review copies etc. Without some measure of DRM they may well have ended up on MegaUpload or a similar site, being given away for free.
Whilst I appreciate that I'm no Dan Brown, and as such my work is unlikely to be sought after in this way, it's still my IP and I have the right to be paid for its exploitation.
The ability to 'gift' an e-book (in the same way as we are able to dropship printed works) would, in my opinion, be a useful addition to Lulu's offering.
To the OP - Have you considered creating an ePub, which could then be distributed via Nook, which does allow gifting?
