Hi Roger, I'll try to explain myself more clearly, I've never been good at that, I tend to waffle a bit lol.
You can do both.
The computer sounds (from the Native Instruments software) are routed through the KN7000 by means of the normal USB connection. So the computer uses the KN7000 as 'speakers' and the computer can also record the 'whole sound' via the USB using the Technics Sound Recorder program. I.e. whatever comes out of the KN7000's speakers gets recorded.
The Native Instruments sounds can be played from the KN7000. To play them from the KN7000 you have to set up Right 1 or Right 2 to send MIDI notes to the computer via the USB (or a MIDI interface). This is not very convenient for swapping between sounds unless you program the sounds to be selected by means of the Panel Memories. This is not so straightforward I have only tried it as an experiment. It works but it takes a lot of work in advance if you want to use it regularly.
Let's say you were doing a recording and you wanted a superb choir in the mix, it would be worth it to include that Native Instruments sound. I'm making some xmas recordings at the moment so I'll try to make an example soon.
None of the above depends on the MIDI keyboard.
Some examples of using the MIDI keyboard:
The MIDI keyboard makes it easier to work with the Native Instruments sounds without having to go into the programming I mentioned above on the KN7000. Set up some instruments on the computer and then swap between them easily on the MIDI keyboard.
You probably wouldn't want to do that live but it would be great for playing at home or recording, giving you access to about 1000 sounds of extremely high quality (the samples are huge and the features and effects associated with each one are wide-ranging). Because computers have vastly more memory than arranger keyboards.
For playing live, the MIDI keyboard can control any sound, dial, switch etc on the KN7000. By assigning it to (in my case) Part 5, it doesn't clash with any of the parts I normally play on the KN7000. I've done a few experiments but it will take a while to set it up in a way that I like.
So, as an example of using it live... You could set up your KN7000 as you usually do, playing Left, Right 1, Right 2, Accomp, drums etc. The MIDI keyboard can then be set up on Part 5, which is not being used on the KN7000, to access any sound in the KN7000, so giving you another manual. Let's say you were playing a James Bond medley. Set up the MIDI keyboard to play that iconic guitar part using a sound on an expansion card. Later, with a button press, it can be a solo trumpet or whatever. You could use one of the knobs to pan the strings back and forth on the KN7000 or to fade the brass in and out.
You could just use panel memories to do the swapping of instruments or the mixer buttons to do the fading, I totally agree. It's just slightly more convenient to have the MIDI keyboard sitting there and move your hand to it.
No great shakes in one sense, for me it's a bit of fun experimenting with it and I've only touched on a few features above. The reality is that my son will probably use it more than me, for his college work because it can control all his recording software etc on his Mac.