I am a long time fan of Knytt and KS, and I feel that those games gave me some of the best experiences I have had with video games. Now, a week ago I have discovered the great fun one can also have making ones own levels. I am sure there are other newcomers, who discover the games and/or the editor at this time, so long after the initial releases, and have fun doing so. I think there are definitely a demand for SIMPLE game editors, and KS editor may be one of the simplest and easiest ones around.
If one should mention a problem, it is maybe that the editor is so firmly linked to almost exclusively making levels that in some way expand the original story and puzzles. It would be fantastic to have a new version of the editor, that made wider customizations possible (easy!), so one could make not only Knytt Story Levels but all kinds of new games build on the same basic idea that made Knytt and KS so great.