> Does pip have the option to limit package installation by licence type?
No, but adding this in would be trivial.> Plus, some packages may be "DSFG Compliant" but may have a licence that isn't FSF approved.
There are categories indicating specific licenses. Use those. They're sub-categories of "License :: OSI Approved". The list of all of them is here:
https://pypi.python.org/pypi?%3Aaction=list_classifiers
