I want to create a Health bar widget that

1. makes the health bar immediately drain from right to left instantly when damage is taken.

2. replaces the lost health with a yellow bar that drains slowly after damage is no longer being taken for a second.

3. Creates a green bar when the player heals that shows the amount of health that has been added on from instant healing effects. The red bar would then slowly refill once healing affects had stopped for a second.

Effectively this bar would be a yellow bar that is drawn behind the Red Health Bar and lags behind it. Can I do this with sky UI? Can this be done period?

Yes it can be done, and SkyUI isn't required. You will probably need to make your own widgets though which will require a bit a talent with Flash and Actionscript. You'll also need to study up on how widgets are incorporated into the game HUD and interfaced with Papyrus if you're not familiar with that already. There are several threads about this stuff here in the Creation Kit forum and also in the Skyrim Mods forum. You can find them by forum-searching "widget" or "actionscript."

Most definitely possible, done it before but it was a while ago.

All the pieces have already been made for you. The meter widget flash file used to be on the SkyUI team's gitHub (i think) but it's not there anymore. But if you download Frostfall it's in there. Then you just need to figure out the widget framework in SkyUI, which isn't too much work if you take a peek under the hood of Frostfall to see how Chesko did it.

That's as far as I can help really, but I'm sure it should at least point you in the right direction. Good luck

- Hypno