I have both K2 and K3 installed. When loading the same multis and running the same sequences in both versions, I seem to hear an obvious improvement in sound quality in K3. It's not just me- my clients noticed the same thing. The sound is warmer, yet more detailed. The effects, especially with the addition of the 'leslie' simulator are much improved. The GUI is also much better- easier to read. Glad I upgraded. Harder on the CPU, though.
Has anyone else noticed the improved fidelity, or am I imagining this?

I'm not an apologist for NI, but I do use Kontakt every day.