Quantum decoherence distinguishes the whole big system into "system" and environment, and shows how system, when density matrix is traced over environment, comes to be decoupled from environment.
This summary is wrong. The system is coupled to the environment. As a result of that coupling interference is suppressed and you can trace over the environment to get a mixed state instead of a pure state.
But this requires distinguishing environment from system, and I do not get how clear separation is possible. Doesn't the fact the whole big system is quantum should bring caution to separating systems arbitrarily, especially considering special relativity effects?
Separation between systems is not arbitrary. You can interact with the environment without interacting with the system and vice versa. So they are separate systems.
You may be thinking that quantum mechanics is non-local and you can change the state of system A by interacting with system B. In reality, quantum mechanics is entirely local:
You might think that Bell's theorem implies that quantum mechanics is non-local, but if so you are wrong. Bell's theorem implies that if systems are described by stochastic variables, then to match the predictions of quantum mechanics they would have to interact non-locally. But in quantum mechanics, systems are described by Heisenberg picture observables, not stochastic variables and the observables change locally.