Does unity have the capability to produce something along the lines of KOTOR?

Well I really want to have the character to have a really huge world. My question is, could something on the scale of kotor be possible in unity? The modeling is not a problem, I can whiz out a million characters in a heartbeat but can unity create a true commercial game on this scale?

Not really sure how to answer the "is it capable of producing KOTOR" part, the only limitation is you as a developer (or your team).

If you're trying to do a continuous virtual world, you would actually create a series of smaller "zones" and then load them in as the player approaches the end of the current one.

Check out Application.LoadLevelAdditive in the scripting help section.

"This is useful for creating continuous virtual worlds, where more content is loaded in as you walk through the environment."

Unity is very capable of large outdoor environments, and if I remember Kotor had lots of smaller "zones" that where loaded as needed, so no problem as these are just "Scenes" in Unity speak. Fire up Unity, create some terrain, drop in some toons and Bob's yer uncle.