Not allowed, that is, to hug large, large lass! (7)
I believe the answer is:
illegal
'not allowed' is the definition.
(I've seen this before)
'that is to hug large large lass' is the wordplay.
'that is' becomes 'ie' ('i.e.' can be a synonym of 'that is').
'to hug' is an insertion indicator.
'large' becomes 'l'.
'large' becomes 'l'.
'lass' becomes 'gal' (I've seen this before).
'l'+'l'='ll'
'ie' placed around 'll' is 'ille'.
'ille'+'gal'='ILLEGAL'
(Other definitions for illegal that I've seen before include "Black-market" , "Prohibited by law" , "Criminal, illicit" , "murder sure is!" , "Unlawful" .)