Is it possible for Arduino as ISP board to flash an ISP master board?
Yes, you can flash an MCU using ISP even if the MCU acts as an SPI device (be it master or slave). The programmer puts the MCU into reset mode, so at the time the sketch is uploaded, SPI will be disabled anyway.
Another thing you need to think of are the other SPI devices (the sensors or what ever the MCU controls). They can pick up the SPI signals sent by the programmer and occasionally write on the bus themselves, therefore disturb communication on the MISO line, which would be critical. There are two options to handle this:

Simply disconnect any SPI slaves during code upload
Make sure there are pullups on the CS lines so they have a defined state (they might be floating while the MCU is in reset). Some slaves might require pulldowns to be deactivated, but that's uncommon.