Once upon a time, The Fathers were dissatisfied with the then current situation of graphics support on Linux. At those ancient times, there were basically two options: svgalib or X. It was an or, not an and, because these two didn't mix terribly well.
So The Fathers set out to fix this situation, and created a sophisticated scheme for a General Graphics Interface. It was designed to encompass the existing options in a nice overall framework, allowing the mixed use of both svagalib and X. It should allow running svgalib applications in X, and X on top of svgalib; even nesting them at will. In short, it should allow seamlessly running any graphical application in any environment, all reliably and securely in parallel.
Fulfilling those goals basically required two major components. The environment independance would be implemented by a library abstracting the different backend targets in a common interface, plus a set of associated frontends to allow using all the existing applications on top of it. (svgalib wrapper for running svgalib applications, and XGGI for running X.) Of course, applications could also use the native GGI interface directly, making use of the backend abstraction it provides.
libggi only as an abstraction for X and svgalib targets however couldn't fulfill all of the desired goals: Having no provisions for secure sharing in svgalib, and sharing only between its clients but not with the outside world in X, reliably using an X server and some svgalib programs on the console in parallel is not possible. Doing this required a more sophisticated, native target implemented mostly in libggi, but requiring some kernel support for secure sharing. That support would be accessed by a Kernel Graphics Interface -- the second major component -- which would implement the actual hardware access and sharing in a kernel driver, just like other drivers do. It would cover just the stuff really necessary for secure sharing (mode setting, framebuffer setup, acceleration pipe access), but not any higher-level logic that can do without kernel support. (It would also require some rework of the console system, to work with KGI.)
So what happend when The Fathers introduced GGI/KGI? Well, libggi found it's niche as a nice multi-target graphics library when used directly throuh the GGI API; it is still active and becoming more and more powerful to this day. The little sister KGI however had less luck: It was immediately faced with strong backlash, from several sides. The X window folks considered X to be The One And Only (TM) graphics interface, that should be used by everything. The kernel guys opposed the idea of integrating graphics drivers into the kernel, maybe because "putting graphics in the kernel" is considered a windows thing or something, and people suggesting it were considered the Bad Guys; maybe because people didn't realize the fundamental difference between low level graphics drivers -- which like other drivers belong into the kernel -- and higher level graphics handling that obviously does not.
Maybe the time wasn't right for an idea that seemed so radical back then, when graphics support was still considered something very special that is best handled by an external entity; when people still believed X could be integrated better into the system over time, removing the entry barriers and making other approaches unnecessary.
While The Fathers struggled on afterwards, the steam was mostly out; KGI soon lost momentum.
Today, things are quite different. In the meantime, the simple fact that some platforms just do not have such a thing as a text mode, forced addition of framebuffer support in the kernel; but once there, it was warmly received -- it turned out many users *want* that kernel support, avoiding the considerable problems associated with the pure userspace implementation done by X. In fact, people even created a complete graphics system called DirectFB, which hacked accelerated graphics support on top of the kernel framebuffer interface. (But lacking kernel support for the acceleration features, inherited many of the problems of svgalib.)
Also, it turned out even X required some kernel support for efficient 3D acceleration, introducing the DRI/DRM interface.
In short, today kernel graphics is a widely accepted fact. Today, people no longer concentrate on preventing graphics support from entering the kernel, but on how to implement a *clean* interface; discussing a mode setting API and everything.
Maybe it's time for realizing that the little baby child KGI, while quite lifeless from the bad treatment it received, is still around; that it's not that ugly after all, but on the contrary offers quite exactly what people are looking for now: A clean, generic, well thought out interface for supporting mode setting, framebuffers, and acceleration feature access in the kernel; and that in fact it has done so all the time, though not recognized for that.
Maybe it's time to give this little child a hand, to let it grow, shape it a bit maybe -- so it can become really great.