I think it should work. I've done giants and dinosaurs before. The vanilla giant zombie is 6 times regular zombie size and the main part of a vanilla dragon is 16 by 8.
There might be a limit though. Maybe start small and increase it a bit at a time to see if there is an actual limit.
I looked through the code a bit. The key bit of code is the EntityRenderer.getMouseOver() method. This is what decides if the player is clicking on an entity. One thing I noticed is that one thing it does it it narrows down the entities to check for using the World.getEntitiesWithinAABBExcludingEntity() method. I looked at that method and it actually has a comment that there is a MAX_ENTITY_RADIUS field that:
* Used in the getEntitiesWithinAABB functions to expand the search area for entities.
* Modders should change this variable to a higher value if it is less then the radius
* of one of there entities.
This field is a public static field so is accessible for you. So I think what you need to do is at some time during loading you need to set that field to the size of your entity.
The default is 2. So it makes sense that you might need to change this in your case.
Anyway, try that and see if it works.