damian
Well, that all depends on your hardware.
One thing to be aware of with Houdini Engine is that any “live” Houdini asset in Unreal that you can change parameters and modify procedurally has to have at least 2 copies of the geometry/particles/data. One copy is inside the underlying Houdini scene and another copy is inside Unreal. If you're done manipulating the asset you can always bake it to a pure Unreal mesh/blueprint and delete the live version to free up some memory.
For now, bake or not, you can at least rest easy knowing that when you actually build and ship your standalone game (without Editor), only 1 copy of the asset data will exist, the Unreal copy. It won't be live anymore (runtime live assets not yet supported) but it will be a more manageable size.
So I'd say experiment. See how far you can push it. It's worth a deeper look. It ultimately depends on your specific game/computer/assets.
damian
Depends what you mean by “bake it down”.
Basically, when you bring an asset into UE4 it instantiates itself in a hidden Houdini scene so when you change a parameter it can cook the new mesh/cloud/result inside the Houdini environment. Houdini assets, regardless of host, can only cook due to parameter changes (in other words, be “live”) if they are also running inside a hidden or explicit Houdini scene.
When you actually compile your game from UE4 into a standalone executable (the thing that you actually ship to your players), also known as “runtime”, all the Houdini logic, including the creation of that hidden Houdini scene, is stripped out of the Houdini assets in your levels. Those Houdini assets become static, like ordinary Unreal assets.
Animations, like collapsing a building, are not yet supported in the plugin. That is live or baked. But we're working on that. Either way, you would have to bake the animation into an Unreal sequence if you want to replay that in your game at runtime.