Do we have an option to apply color formatting based on kpi in a table component in Knowledge Models and Views?

Yes you have to create a custom object and then associate it with a flag in the knowledge model.

https://docs.celonis.com/en/views-components.html#UUID-f9eeb23f-5d00-22c1-13a1-960b8c059ea9_id_ViewsComponents-Cross-ComponentSettings

I'd start here. There are quite a few examples.

That link is broken- is there a working source of that information?

https://docs.celonis.com/en/knowledge-model---custom-objects-and-custom-attributes.html

You should be able to find it here. There are quite a few examples on how to build custom objects.

https://docs.celonis.com/en/table.html

This page shows you the table configurations and it in are where you'd be able to enable the custom attributes in the YAML.

Here is where you'd apply it in the Visual Editor

Building custom objects seems to only accept static values, not a reference to a KPI like the original question was asked for. Or am I misinterpreting the documentation?

I haven't tried incorporating variables. You may be able to pass runtime variables through them and then have them updated using the associated app/view, but I haven't tried that.