If the floppies are not copy protected, then there should be no problem. Copy protected disks, however, don't work so well with Kryoflux's IMG file creation (the software DTC.EXE that is, may get better with versions after 2.5.) Those will need 3rd party converters to convert the RAW dump files into a usable image. The ones I know about are:

LibDsk will not read Kryoflox RAW dump files, but can convert between several other formats.
SAMdisk will read and convert Kryoflux RAW dump files, but only IBM FM or MFM format.
PCE is actually an emulator, but if you download one of the PFI versions here, it can convert Kryoflux RAW dump files into it's own PSI format which supports many copy protection methods. The instructions for doing so can be found here.

My understanding was that KryoFlux was actually *preferable* for original disks w/ copy protection because it does a physical layer imaging, not a filesystem duplication. Is that an incorrect understanding?

That's correct. Kryoflux actually does an extremely low level read of the analog flux transitions on the disk. This is actually below all forms of copy protection (except one,) and therefore isn't effected by them. But the data is so basic, that using it in emulation is problematical at best. With the more recent software & BIOS revisions, it can be written back to floppy (except in very specific situations I'll explain later.) But using it in an emulator requires converting to a higher level format. So, if all you want to do is re-master a disk for use in a physical system, then archiving a RAW dump is all you need. However, if you want to then use it in an emulator, you will need an image format that both preserves the copy protection and an emulator that supports that format.

The one protection method that is actually below the analog flux transitions, is physical damage to the disk. I've only ever heard of it being used on PC disks, but that doesn't mean that other systems don't use it. I also don't personally know of any disks that use it, I've just read about it during research. From what I've read, it is done by creating a pin-point hole in the disks surface that covers one sector.

The failure to re-master that I referred to concerns "flippy" disks. Many 8-bit systems (Commodore 64, Atari 8-Bit, Apple II, etc...) only use one side of a floppy. Many disks, however, had data written on the other side that is accessed by physically "flipping" the disk over. Kryoflux can read these disk in an appropriately modified drive by reversing the transitions read on the back side. However, at this time, it cannot write this data back in the same manner (the reverse side ends up corrupted.) If your curious, the necessary modification allows the drive to step the head below track 0 (to -8 for HD or -4 for DD.) It is also possible to modify a drive to ignore the index sensor, but this will reduce Kryflox's ability to accurately read timings (very important for some copy protections.) Finally, some flippy disks actually had 2 index holes, which would eliminate all need for modifying the drive.

That makes complete sense. Thanks for the explanation. In my case, I'd be more interesting in archiving the physical disks of PC compatible boxed software with the potential of using them in emulators. So I think KryoFlux is still the best choice for saving a RAW dump for remastering later.

That said, there's nothing stopping me from also taking a higher level image at the same time with other software. Do you have any advice for logical imaging software that does preserve copy protection. I imagine WinImage won't cut it.

WinImage won't give you anything more than the Kryoflux DTC software can. If you already have a Kryoflux, then working with the RAW dump files is probably your best bet. Since we're talking PC floppies here, you won't have to worry about any mods on the drive you use. SAMdisk can convert those to IMD format if you have an emulator that can use them, or PCE's utilities can create PRI files. The only other format I "know" supports some copy protection is teledisk's TD0 format. I still haven't found a converter that can convert the RAW dump files to that, so you might need teledisk if you have an emulator that uses TD0 image files. I don't personally know of one that can use TD0 files without also being able to use PRI or IMD files, so I don't really see the need for anything else at the moment. That could change of course.