KDS V1.0.1 (beta) is using the GNU 4.8.0 toolchain, while the latest and greatest from ARM Inc. on launchpad is the 4.8.2 GCC ARM Embedded.
KDS V1.0.1 (beta) is using an older newlib nano which requires at least 400 bytes of HEAP memory.
This is an issue for smaller Kinetis devices (e.g. less than 2 KByte of RAM).
It is possible to switch the tool chain and libraries in KDS to the 4.8.4 (or later) from ARM/launchpad.
The following article describes the details and steps to use a different toolchain than the default one:
Basically it means to put the GCC ARM Embedded into a special folder inside KDS.
That article explains as well the differences between the original KDS tool chain and the GCC ARM Embedded one.