1. Use double-precision floating point math. This does not fix the underlying issue as much as it papers over it; this also has unfortunate sideeffects as many data structures in the engine now take up literally twice the space. This has performance implications as well: We gain a lot of speed using SSE instructions on some of our math operations, which require that they be done using single-precision floats. Plus, there is rendering performance to consider: While modern GPUs are incredibly fast even in double-precision workloads, they are still much slower than they are when doing single-precision calculations.
What kind of system requirements would be needed to run a game like this smoothly?
Always treat the player or camera as the origin point of the global coordinate system. This is a technique that is used by modern streaming game engines like Unreal; since every important action will happen within the zone of highest precision, float inaccuracy will never be an issue. This would require extensive redesign of the physics system to make work in FSO.
I know this might be silly, and probably a great deal simplistic, but how?
Considering that LUA script have the potential to normalize in-mission-jumps, checkpoints as well as the normalisation of hull repair in newer mods
What do you mean by "normalize", "in-mission jumps", and "checkpoints". If I was to guess in mission jumps, I'd assume like Wing Commander's "Autopilot" function.
However I think, this doesn't require the so much to alter the overall mission space avalible but to add tools to effect the illusion of distance. . . . To more control an illusion of distance here then, could be affected by on a case by case basis or globally by on a "if distance >{any value} then multiply all distance on the HUD by {any factor}" or through "add {value} to distance displayed"
So, this would basically allow you to set speed-gauge and distance gauge to read erroneously long distances, or extremely high speeds on a case-by-case basis?
Worth noting that not even Elite Dangerous, a game which builds entire solar systems at full scale, actually uses large playable spaces - just a TON of instancing.
How large, and what does "instancing" mean?