Hi Dave,
Yes it can but you need to set the iMac on target display mode. The way to do this is the following;
How do I enable TDM?

• Make sure both computers are turned on and awake.  
• Connect a male-to-male Mini DisplayPort or ThunderBolt cable to each computer. 
• Press Command-F2 on the keyboard of the iMac being used as a display to enable TDM. 
• Note: In Keyboard System Preferences, if the checkbox is enabled for “Use all F1, F2, etc. keys as standard functions keys,” the key combination changes to Command-Fn-F2.

How do I exit TDM?
To leave TDM, press Command-F2 on the keyboard of the iMac that is in TDM. You can also exit TDM if you shutdown or sleep either computer or detach the cable. 

We recommend you to use the CSV-2301 as this USB graphics supports up to 2560x1600p. The 27″ iMac maximum resolution is 2560x1440p
What do you need?
A free USB 3.0 port, an USB 3.0 Graphics device such as the CSV-2301(1600p) or CSV-2302 (2160p) and a DisplayPort to Mini DisplayPort cable

If you have any further questions please let us know.
Regards