The clock rate is only half of what determines the speed of a CPU. The other part is IPC, the number of instructions a processor can execute in each cycle. Intel has much higher IPC, which means that their individual cores are faster than AMD’s, even when they have a lower clock rate. AMD makes up for this by having 8 physical cores, which makes it faster in highly threaded applications.
Your current build with the 4670K is more than enough to run the UE4 and have a nice experience for the most part, but you will have still have slowdowns and waits for building levels, this is unavoidable. A GTX 770 is going to be able to render pretty much everything you can throw at it, within reason, it’s a high end nVidia card. Whether you lag with it depends on how much you push today’s hardware. Games have to make tradeoffs between performance and graphics. Your question about running the engine without any impairments is a little flawed, you will always be able to create lag on any rig by pushing graphics beyond what it can handle.
That said, you can create good looking games with an i5 4670K and GTX 770 while having acceptable FPS in the editor. You may not always have a fluid 60 FPS depending on how intensive your game is, but that build is enough to develop on. I believe that the renderer in the engine is just dual threaded, but calculating lighting can probably use as many cores as you have.
If you think that in the future you will be able to upgrade the CPU, the 4670K is attractive, moving to a hyper threaded i7 will get you decent improvements. If you aren’t considering upgrading, the FX-8350 starts to look nice because it will significantly outperform the 4670K in highly threaded tasks where all of its cores are used, it also overclocks slightly better, and it’s cheaper. There isn’t really a “wrong” choice, both will give you enough performance for what you want to do, it just comes down to how much you want to spend for more power.