KSRC is not a environment variable, it is a make variable. So, I'd expect debian/rules KSRC=foo kdist_image to work but not KSRC=foo debian/rules kdist_image.
There's really no harm in making it be an environment variable; I can
replace $(KSRC) with ${KSRC} in debian/rules. Please confirm that
fixes your problem and I'll upload the change and close the bug.
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