Hi,
Can characters have quite good detail in the game engine plenty of vertices, polygons for detail? I imagine texturing with images seems more appropriate considering there are limits.
It all depends on the intention of the game you are trying to make, if it is for yourself, you could try how much polys your pc can handle in once scene, just for testing pourposes. If you are trying to make a playable game for all people, you must work on a lower level of detail, trying to archive the lowest poly count you can, and maybe try adding detail with texture maps (normals, specs, etc). but for that you want to go first into a lowpoly asset or charater, and then downlow the poly count to get a good normal for detail adding to a low poly mesh.
As LOD-levels are separate meshes, you can have them on skin mesh objects too. Ensure they have the right setup (vertex groups etc)…
I guess shape-key animation will not work as expected.