Don't know why it is rejected on your system (I am no diff/patch expert), it just ran fine on my Ubuntu system
Code:
PoP:~/Kindle$ patch -p0 < KiTerm.patch
patching file ./KiTermOriginal/font.h
patching file ./KiTermOriginal/launchpad.c
patching file ./KiTermOriginal/launchpad.ini
patching file ./KiTermOriginal/terminal.c
PoP:~/Kindle$
But anyway, here are the updated sources after the patch is applied:
KiTerm 36x100 2011-04-08 src.zip