I've been doing the same thing with my collection, which is a huge undertaking. As for the lyrics, they are imbedded in the tag information on the file, so they follow the file wherever you move or copy it.
For album art, it depends on how you add the artwork. if you let iTunes download the art automatically, it is NOT embedded into the file, so if you transfer that file to another computer, the art doesn't go with it. If, however, you manually add art by pasting a photo in the song/album in iTunes, that artwork IS embedded in the file.
It's more work to manually add artwork, but the other advantage to this method is that the artwork you can manually add can be of a much higher resolution and quality than that automatically downloaded by iTunes.