[Django]-Best way to incorporate external django app into a project and safely make local changes

My quick take on this: either fork the project on bitbucket or github (depending on your preference of hg vs. git) and make a branch for your changes.

This will make it easier to keep your branch and the official master in sync.

Then, assuming you use pip+virtualenv, add the pointer to your repo/branch in your pip requirements file.

Unfortunately LFS uses buildout, so not quite sure what the equivalent of python setup.py develop would be (i.e. to install the package in your virtualenv site-packages but with links back to your repo so you can make changes without having to constantly run setup.py).