I was wondering why I cannot edit footprint of LED 1206 to take care of LED 0805 as well so that I can mount one of them depending on the availability. To do this, I have to increase the pad size of 1206 footprint on the inner side to give a clearance of around 1.2 mm between two pads. I want to know the impact of increased pad length in the PCB.
If you increase the pad, you will probably increase the amount of paste too. Too much paste will increase the possibility of the component tombstoning as the solder melts.
As long as you follow the board design rules that will not cause any problems. You will also slightly enhance the heat dissipation for the 0805 part. You need to watch out for misalignment of the 0805 part. During smd assembly the parts self align using the solder surface tension the larger pads will allow the smaller part to move around more.
You don't have to worry about not been able to mount it. If you use 1206 footprint you will be able to mount 0805 component. It will be in it's internal size limit but you will be able to mount it without problems.
In the link you can see different sizes.
Also maybe you can't edit the component as it's protected against writing. Try to create new copy.
My recommendation however is not to do this as this increses the posibility of creating a connection using only the paste(short circuit) if you are going to solder by hand.