Currently we have to do all reports/dashboards at the parent level if they will be embedded which means we can't give our clients access to build them.
This is outlined on our Wiki:
You could however use web services to embed a client org report. This would take a bit more development work on your part though. I've gone ahead and attached an example of this if you are interested in pursuing this as a work around.
Also, here is a link to the wiki page outlining web services for your reference: