I spent the summer of '09 working in Louisville. At the time, Six Flags was still operating the park, but it seemed that the place just wasn't open a whole lot. It stands to reason that a seasonal amusement park would maximize it's hours during the summer months, but with KK it just wasn't the case. The park would open in the afternoon (not morning) and close early. When the state fair came to town for a few weeks in August, the place was completely closed. Not that Six Flags was a shining example in the business at the time, but it's pretty hard to turn a profit for anyone when a quarter of your season is lost because the fair is in town. If there were other regulations (operating hours, parking...etc) or a ton of money going to the fair board, making money there might have been a pretty tall order.
Of course I don't know all the details of their deal with Six Flags, but I'd be very interested to see them. It might offer a little insight as to why things went so bad there. Louisville is a great city and an amusement park once flourished there. I'm pretty sure that on a local scale, one could flourish again as long as it's done right. If the fair board's demands are too much though, it won't be a money maker. If it's not a money maker it simply won't open.
In the case of Holiday World, the question is one of financial viability. They have a fantastic reputation, and they already split the Louisville market with Kings Island. In short they have all the cards. That said, how much will their business really expand if they reopen Kentucky Kingdom? Would it really be beneficial to their brand or bottom line if it was only a modest financial success? If they can't run the place like they want to, and/or the profit is minimal, it might not be worth it to them. Holiday World's business model makes them a perfect candidate to make the park a success again. If I were the fair board, I would make it worth their while to come in and do their thing.
On a related note, I really like the Bluegrass Boardwalk name and logo, if it sticks.
Holiday World will have a long way to go towards getting the park back in operational shape and will need to add quite a few unique rides in order to garner interest from both locals and visitors. It's going to cost a pretty penny, and that's why I worry about the Koch family. They've done extremely well in Indiana, but something like this will costs many, many millions of dollars and could bankrupt any company who attempts to make it work while dealing with the Fair Board.