We have been able to work around the problem somewhat. We've succeeded in using Model Builder to convert from KML by dragging the tool and the inputs in to the model, and have batch built pyramids using the context menu in ArcCatalog. In both cases the tool's inputs were provided before the tool's window was actually opened, so although nothing is displayed, if you click OK to run the tool, it will work. I imagine this could be trickier for a multi-parameter operation, but Model Builder would be worth a try.
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