I have this set-up, but without resources in the "library" project. My main project is an Android project, but the "library" one is just a standard Java project. This seems to work well.
Under the build path ("Projects" tab) for the main Android project I have added the library project.
The library project's .project file looks like this:
<?xml version="1.0" encoding="UTF-8"?>
<projectDescription>
<name>DataExchange</name>
<comment></comment>
<projects>
</projects>
<buildSpec>
<buildCommand>
<name>org.eclipse.wst.common.project.facet.core.builder</name>
<arguments>
</arguments>
</buildCommand>
<buildCommand>
<name>org.eclipse.jdt.core.javabuilder</name>
<arguments>
</arguments>
</buildCommand>
<buildCommand>
<name>org.eclipse.wst.validation.validationbuilder</name>
<arguments>
</arguments>
</buildCommand>
</buildSpec>
<natures>
<nature>org.eclipse.jem.workbench.JavaEMFNature</nature>
<nature>org.eclipse.wst.common.modulecore.ModuleCoreNature</nature>
<nature>org.eclipse.jdt.core.javanature</nature>
<nature>org.eclipse.wst.common.project.facet.core.nature</nature>
</natures>
</projectDescription>
The Android project's .project file looks like this:
<?xml version="1.0" encoding="UTF-8"?>
<projectDescription>
<name>Project</name>
<comment></comment>
<projects>
</projects>
<buildSpec>
<buildCommand>
<name>com.android.ide.eclipse.adt.ResourceManagerBuilder</name>
<arguments>
</arguments>
</buildCommand>
<buildCommand>
<name>com.android.ide.eclipse.adt.PreCompilerBuilder</name>
<arguments>
</arguments>
</buildCommand>
<buildCommand>
<name>org.eclipse.jdt.core.javabuilder</name>
<arguments>
</arguments>
</buildCommand>
<buildCommand>
<name>com.android.ide.eclipse.adt.ApkBuilder</name>
<arguments>
</arguments>
</buildCommand>
</buildSpec>
<natures>
<nature>com.android.ide.eclipse.adt.AndroidNature</nature>
<nature>org.eclipse.jdt.core.javanature</nature>
</natures>
</projectDescription>
I don't remember doing anything special beyond that in setting this up.