I don't know about using it with a KVM, but I can tell you this, once you plug the external dongle into the USB, the internal bluetooth turns off.
How do I know? Here's my experience:
1. My external monitor sits several feet away from my MacBook Pro. I use a bluetooth keyboard and bluetooth mouse. Because I'm a bit far away form the MBP, the bluetooth connection using the internal bluetooth is not very reliable and often the mouse tracks unreliably. I bought a DBT-120 external bluetooth dongle and using a USB extension cable routed the dongle closer to where I'm sitting. Now, there are no problems with tracking etc.
2. When my mouse and keyboard is paired with the internal bluetooth, their respective names are CGYH Mouse, CGYH keyboard. When it is paired with the external, the names are conalho's Mouse, conalho's keyboard. I can check right now and yes, it is being paired with the external and not the internal.
So, I conclude, plugging in the external bluetooth dongle de-activates the internal bluetooth unit.
Now, whether or not it works with the KVM I don't know.