Last year, I rode the entire length of the KVR (and the C&W) from Castlegar to past Brookmere. The conditions of the trail vary from great to terrible. The best part is the short section in Myra canyon which is hard packed, and the rest has a lot of loose gravel and some soft sandy stretches. I strongly suggest that you get the widest, fattest tires that your bike can take. I did this trip in a loaded Trek 520 as a tail end of a longer trip that began in Edmonton and ended in Vancouver. I switched to cross tires for this section and I got a lot of pinch flats -- practically one a day. If I were to do this trip again I would take a 29er front suspension mountain bike. I was spinning my wheels and skidding a lot in the sandy parts, and there are plenty of rocks ("baby heads" in MTB-speak) that made other parts quite jarring.
I stayed at the Tamarack Lodge in Beaverdell which caters well to cyclists. The facilities are a little shabby but their meal portions are generous and they'll even pack you a lunch for the next day. I did the gruelling stretch from Beaverdell to Chute Lake in day, but there is another lodge in between if you choose to go slower, giving you time to really linger at the spectacular Myra Canyon. The restaurant in the Chute Lake camp closes early, so if you want a hot meal at the end you need to time it well.
On the descent into Penticton, I opted for a bit of paved road because I wanted to stop at a winery for lunch, which was a nice treat.