A long long time ago we had an arrangement like that with KP. But nowadays KP is a direct advertiser, in the sense that they pay for their ads to appear on KH. However, KP does track sales originating from KH in order to gauge the success of their ads, so it's always great if folks are clicking on those banners.
In related news, we are planning on carrying yarn and needles in our store. We haven't finalized the needles yet, but are looking at Knitter's Pride, Clover and Chai Goo. Knitter's Pride, we have come to find out are KP needles. Same India manufacturer.
We currently worked out a deal with Webs where we can start offering their yarn lines as part of kits which we will be selling in our store. It may lead to other things such as selling skeins outside of kits, but we are taking it one day at a time. We are not looking to become an online yarn retailer. We just want to get yarn and needles in the hands of beginners who come to this site. We also want to introduce them to wool. We will be starting with their Berkshire bulky worsted weight, as it's one of Amy's favorites!
Also, on the QT: We're going to be branching out and creating a crochet version of KH, appropriately called http://www.CrochetHelp.com/
It's likely a few months away.
There's a lot going on here at KH. We've been on a roll lately with a lot of new videos and we are just rolling with the momentum. It's exciting!