Hi,
Yes, I think it is possible. I don't play MMORPGs a lot but the engine basically only has a notion of life points and you can use it like you want. You can change the maximum level of life points at any moment to implement the level-up feature. In Zelda it corresponds to obtaining a heart container or 4 pieces of hearts, but this is scripted in our Zelda games, not in the engine.
I don't know if you want to use the combat system of the engine or our own one, but with the one of the engine, how the damage work can be customized at several levels.