Apple - UHD Blu-ray playback on iMac 5K 2017?

Yes, you can get UHD working through that blu-ray drive. Copyright decrypting, hardware acceleration etc are all features implemented in prior chips so they're definitely in Kaby Lake. Display is HDCP 2.2.

I think the biggest difficulty here will likely be in finding good software. I would plan on having to buy some, shop around and find the best one for you. I don't have any recommendations for software but I know that it should work & looking around there's at least some software that claims to do this.