Yes, there is a small problem with this DIY.
You state:
"Connect KP Yellow wire to White wire (pin 146 on M123) on connector."
The White Pin 146 wire is the "Combination Switch Output 4".
You state:
"Connect KP Blue wire to Sky Blue wire (pin 123 on M123) on connector."
The Sky Blue Pin 123 wire is the "IGN Feedback".
If you look at the KPtechnologies installation manual you'll see that the yellow wire is the switch ignition input. This wire provides power to the onboard power supply that then powers the microcontroller and other onboard electronics. The Blue wire is the "BCM Output" designed to be connected to the output signal of the BCM matrix control circuit.
You have these wires reversed, and as such, this module will NOT work.
This DIY instructs people to connect the power feed to a data signal - this can lead to damage to the BCM. Since our circuit board is a low power device (6-7mA) just connecting it to the data line probably won't damage anything, but if he would have connected the (+) side of the relay coil to the KPtech yellow wire it most likely would have fried the BCM.
I would be very curious to know if this is how you left your installation. It simply isn't possible for it to work correctly connected as shown.
As far as the issue of the lights staying on at all times you have most likely damaged the output transistor that drives the orange wire when you connected it directly to 12vdc. The output is current limited, but not to the point to survive a direct short for an extended amount of time. Shoot me another Email and we'll set up an RMA for a free factory evaluation and repair.
At KPtechnologies we stress to ALWAYS verify EVERY connection with a volt meter (except for the data lines, they should ONLY be tested, as per the installation instructions, with an oscilloscope to prevent damage). Blindly following service manuals, tech sheets, or even DIY can cause major issues if there are mistakes or changes.
With the exception of reversing the two wires this is one of the best DIYs I have seen. I really like how you took the time to screen capture all the functions of the BCM - it makes the "why it works" a little easier to figure out.
As far as this being "more difficult" then an independent switch you really only have two extra wires to install this module - the BCM data wires. You'll still need to install a relay as shown here, and you'll have to install a switch with two wires. The only real issue with this module is that most people (and shops for that matter) don't have an oscilloscope to verify the data wires. This is why we added the status LED a few years back, to make that step easier to verify!
Ha, look at that, we are actual engineers! Not only that, we stand behind all of our products with a lifetime warranty even on products damaged by improper installation! :D