Would a 1000 km telescope be able to resolve microscopic detail? I have calculated that a 100m telescope can resolve 16m on the moon. Does that mean a 1000km telescope is 10000x better and can resolve 1.6 mm objects on the moon and even smaller closer? Or is there some limit to using a telescope as a microscope?
Ignoring the effects of the atmosphere and the engineering issues you would need to overcome to build such a monstrosity, yes you could resolve details that well.  There is no physical reason you couldn't.

There are many optical interferometers, but their baselines are currently only tens to hundreds of meters wide. See this List of astronomical interferometers at visible and infrared wavelengths.

In fact, radio astronomers regularly achieve such spatial resolution by combining multiple far apart radio telescopes together to act as one giant telescope. This is a technique called very long baseline interferometry, and it was used recently to create the first image of a black hole by the Event Horizon Telescope using sites distributed across the Earth.