According to the National Electrical Code (NEC), it is generally not permitted to splice the sub-feed in a panel. The only exception is if the splice is made in a listed junction box or enclosure that is designed for the purpose.In your case, it is not possible to fit the 2/0 aluminum wire under a 125 amp breaker. However, you could use a 125 amp breaker and splice the 2/0 aluminum wire to a length of #1 copper wire that is long enough to reach the breaker. The splice must be made in a listed junction box or enclosure that is designed for the purpose.It is important to note that the splice must be made in a manner that is approved by the building inspector. The inspector will need to verify that the splice is made correctly and that the junction box or enclosure is properly installed.Here is a link to the NEC section that addresses splicing in panels:[https://www.nfpa.org/codes-and-standards/all-codes-and-standards/list-of-codes-and-standards/detail?code=70](https://www.nfpa.org/codes-and-standards/all-codes-and-standards/list-of-codes-and-standards/detail?code=70) Flag for review