Jon (kooljock) has the story pretty well summed up.
For some clarifications:
It's not entirely impossible that K-Line still has some kind of office someplace in North Carolina. Lionel retained some of the former K-Line employees, including the former VP, Nick Ladd. So unless these people moved to Mount Clemens, Mich., it's not out of the question there could be some kind of satelite office. The former MDK K-Line site located on Dodsons Crossroads was a large facility that was leased. Even when MDK K-Line was there, it was an obscure looking facility and you might never have known K-Line was even there. It would make sense that there's no advertised phone number in N.C., since Lionel is managing the product line (for the time being...), so questions and inquiries would of course be directed to Lionel. As even the new website is kline.lionel.com
Lionel is basically marketing the line for the Chinese firm, Sanda Kan, for which K-Line was so in debt to. Sanda Kan is a manufacturing company, with no retail connections in the US. Depending on who you believe, MDK K-Line was in debt to the tune of $6-10 million, so you can well imagine Sanda Kan would have an interest in a responsible firm marketing the line so they can recoup some of those losses. And much Lionel product comes from Sanda Kan.
I wouldn't necessarily call the K-Line Collectors Guide "complete" by any sense of K-Line's products. The book was stalled several times as K-Line had to try to find items they had produced but not taken separate photos of. The delays were also because they kept adding new material to the book. Since the book came out in 1997, it could only be "complete" up to that point. K-Line's most productive years, as far as new tooling and products go (especially scale), came after that point. So there are a good many K-Line products not mentioned in the book anyplace.
Even if you had all the K-Line catalogs from 1997 to the point where they ceased to be, as a private company, MDK K-Line made a good many uncataloged products. A good example of these would be the extensive line of exclusive Conrail products made for employees of Conrail and given out as Safety Award bonuses. And also the KCC products, and others made for the TCA. Plus Boscov's Department store had a long-time good relationship with K-Line and had many products made for them exclusively, in mostly the Reading Railroad. A few of those were later cataloged, albeit with differing numbers.
Also K-Line continued to make starter train sets, although many went uncataloged. The "Fast Freight" series of sets later came with K-Line's SuperSnap track instead of the previous 027 track. Though most of these sets came with cars and loco types that had been previously made, such as the Burlington Northern MP-15 "Fast Freight" set (the BN MP-15 had been cataloged as a separate sale loco in 1996).
Going back to Lehigh Valley's question, YES! If you are a traditionally sized train operator, especially with 027 track, the K-Line S-2's, MP-15's and Alco FA's are a superb value. Although by the catalog illustrations, Lionel has changed the trucks on the former "Train-19" cars, the K-Lionel $24.95 starter cars are also a great value.
Other than the delays on the delivery schedule, I think Lionel is doing a terrific job with the K-Line products. Some are disappointed there aren't more scale products, but remember these are many of the products K-Line couldn't sell without blowout pricing. I'm certain Lionel doesn't want to reissue them until there's sufficient demand.
Also note that the prior K-Line 027 RDC motorized cars are now being made, with many improvements, by Ready Made Toys and is called "The Buddy." Very good deal for the money. RMT is also introducing a modified (and improved) version of K-Line's prior Alco S-2 switcher, now called "The Bang" by RMT.
