I'm not sure what is happening...
LaTeX does not know any lilypond package.
Lilypond-book gives these error always:
####
~$ lilypond-book --pdf --output=out file.lytex
[...]
File "/usr/lib/python2.7/re.py", line 242, in _compile
raise error, v # invalid _expression_
sre_constants.error: bad character range
####
and nothing else happends.