We added a lot more support into the KML to Layer tool in 10.0 service packs, and ultimately the best experience with it in the 10.1 release.
It sounds like your KML may have groundoverlays (rasters) inside of it?
That wasn't something the tool initially supported - only the latest version of it supported this.
I can only suggest to have a friend with a new version export and down-save the GDB for you, or there might be 3rd party tools compatible with 9.3 that will translate it.