You can use Quixel assets however you want as long as the end results ends up in UE (details are in the EULA). You can license them for other uses. This includes modifying them as much as you want in any program.
Nanite allows these heavy assets run well on modern hardware that supports it.
There’s LODs already made and included with Quixel bridge, just need to dig into the settings. You can also use the LOD generation within UE.