Edit: I figured it out, and I will record it here for future reference:
Even though I could not install the hot fix directly from the bin file using "Update Your Kindle", and I was still in demo mode, I found that I could just install KUAL and MRPI, and install the hot fix using MRPI instead.
I'm now out of the demo mode and I've just successfully installed KOReader and a bunch of other KUAL extensions.
Thanks for all the people who've posted their previous experiences in this thread - it was very helpful!
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