Is it possible to make a huge star system 1 LY in radius, using UE5?

No problem at all but for this scale you need to use proper distance unit.

There would be problem if expect to have “light year” scale coordinates, and in same time you expect “milimeter” scale coordinates locally (like in your starship, or details on one of planets" - because floating point accuracy.

“double” could give enough precision for both, but still there could be problems from GPU side (at least low performance).

Generally “interplanetary” games do some tricks with having (and switching) independent map for each planet (and additionally for detailed “sites” on planets - like cities, bases etc.), and common map with solar system.