Is it possible to make an operating system using java?

In theory yes, but you'll still have to have some low-level assembly code to bootstrap the Java VM that will run on the machine, and also low-level code for accessing hardware drivers.

From wikipedia:

Given that Sun Microsystems' Java is today one of the most dominant object-oriented languages, it is no surprise that Java-based operating systems have been attempted. In this area, ideally, the kernel would consist of the bare minimum required to support a JVM. This is the only component of such an operating system that would have to be written in a language other than Java. Built upon that JVM and basic hardware support, it would be possible to write the rest of the operating system in Java; even parts of the system that are more traditionally written in a lower-level language such as C, for example device drivers, can be written in Java.

Examples of attempts at such an operating system include JX, JNode and JavaOS.

In theory, yes. But you would need to somehow get the Java VM running using low-level code (unless you want to compile Java down to assembly, which probably isn't possible without sacrificing a lot of Java's features).

In theory, you could actually write the entire OS in Java with a Java processor. Basically it uses Java bytecode as the instruction set for the processor

It depends on what you consider "features". If you mean graphical interface, fancy window effects, etc. then yes, although you will need assembly language or C for the very lowest bits (i.e., interfacing with I/O ports, etc.). If you also include the Windows ABIs as a feature then it gets harder since they follow Pascal calling conventions.