At the very bottom of Page 48 of the manual ( http://www.kawaius-tsd.com/OM/K_SYNTH/K1_Synth.pdf
), it seems to imply that it does not respond to LOCAL ON/OFF in the AUX section of it's MIDI implementation...
Can your sequencer change the MIDI channel of the incoming notes so that when it sends them back out, they are on a different channel than the K1 is on?
Set the K1 to separate Trans and Recieve channels?
Fairlight IIx (Mid-Life Crisis - cheaper than a Corvette!)
Roland JP-8, D-50, S-50, S-550(2x), S-760(2x), JX-3P, JD-800
EII, Emax II, Minimoog, ARP 2600, P-5 Rev.1 (broken...), Pro-One, Crumar Performer, K1m, K5m, MS-2000B, Virus KC, a few other things.