Yes.
Go download Warriors of the Sky, Alpha 2, if you want to see what near-constant carnage looks like. IMHO, it's not pretty- a server will be very hard-pressed to keep up, if 20 players are all causing constant warfare by interacting with a single huge Zone. If you have a computer that can play that without FPS drops... go right ahead and develop even bigger fights. There's nothing stopping you...
But FLE, while it will set the frequency of Encounters in a given Zone, will not, by itself, allow you to create truely huge battles. To do that, you're going to need to hand-edit a custom Enounter file. It's not hard... take one of the basics, like Area_Defend, and alter the number of NPCs that spawn.
Much better, imho, to control things and keep it subtle, by making lots of small Zones, some with high amounts of conflict, some with very little. The choice is up to you, of course... but bear in mind that:
1. "Constant combat" is in the eye of the beholder. To me, that implies a lot of combat that involves AI vs. AI interactions, not just AI vs. Player interactions. If it's just AI vs. Player combat you want... go look at the way that the Nomad system was set up in FL. But that's pretty boring- I'd rather go through a minefield with Cruise on than have to kill 100 Nomads in a row, just to get to the next planet.
2. You can make huge numbers of ships spawn via a single Encounter event. I'm not going to get into this in detail, but you can make very large groups of ships all appear at once, without any problems. So if you're looking for big battles, that might be a smart way to do it... set a relatively small Zone at the end of a Trade Lane, for example, and then have it trip an event that would give a 100% of 12 of a given sides' ships appear... and then have the Zone refresh itself and spawn up to 12 more ships, and so on. I've had battles of more than 10 vs. 10 AI ships during tests, so it can be done... just not without a fair amount of lag