Yes, they are.
See the following rules that are pretty much standard for any MMO (I have taken these from the Ragnarok Online EULA)
"You may not modify any part of the Ragnarok Client, Server, or any part of the official Ragnarok website." (Which almost every emulator in existance does)
"You will not attempt to play Ragnarok on any server that is not controlled or authorized by Gravity Interactive or its designees." (Which is a violation right here)
"You will not create, use, or provide any server emulator or other site where Ragnarok may be played, and you will not post or distribute any utilities, emulators or other software tools related to Ragnarok without the express written permission of Gravity Interactive" Violation here...
Just because the company does nothing about it does not mean that it isn't illegal. I will not have them in this topic, as it violates the forum rules on illegal material.
EDIT:
Also I'm not sure but can you interact (ie: chat) with people in KoL like you can a normal mmorpg or not. Its been forever since I've played.