I'm certain it's possible to get things down to a much, much more manageable size. I've only worked with UE4 a bit but the things I was packaging were less than 5GB and that was with entire landscapes populated with models. Sorry I can't offer any advice directly but if you google "ue4 package too large" there are pages and pages of people asking+answering this question on the ue4 forums, ue4 q&a, ue4 docs, reddit, stackoverflow, etc etc. Follow a few of those and also delete any crap that's 500MB for a single model like you did with the character model
If your PC really can't handle better than those minimum settings you might want to consider upgrading if you have the cash, or making a game in a less demanding engine. Dev in UE with a computer that can't run the game you want to make, let alone run the tool that's building it, is going to be excruciating. Typically running a finished game with all the LoDs set nicely and models optimized down to low polys is already quite demanding; in dev you're not always going to have LoDs set up and you're occasionally going to be putting in some horrendous 500MB unoptimized model as a temporary measure
A quick google tells me a basic blank map should build to about 300MB, and nicely compressed can go to ~50MB. Try building something that large, then start adding assets to it, taking note of what's making it balloon in size. I doubt you want to go above 1GB at this stage