These old KZ's are pretty tall and you can get some drop but not much with out causing trouble.
My wife is short like that, she rides a stock Yamaha V-Star custom and can put her feet flat on the ground.
I would like to get her on a Ninja, those can be dropped to fit short folks
Have you done any modifications to the seat? The padding today is quite a bit different than days of old. You can ask a reputable seat maker what they think can be done with the seat to lower the height and still retain a decent comfort level. It may not be like riding on a cloud but it is an option.
Keep in mind that when a bike is lowered other, unexpected consequences might become apparent.
Loss of cornering clearance before hard parts contact the road. Taken to it's logical conclusion, hard enough contact when leaned over will effectively jack the back wheel off the road while in motion.
The centerstand will become much more difficult to deploy, because the mechanical advantage of leverage is progressively reduced as the bike is lowered. A shim (block of wood) under the back wheel will make it easier to use the centerstand of a lowered bike.
The sidestand will become effectively longer as the bike is lowered. A point can be reached wherein the sidestand is too long for the bike to lean onto unless the bike is parked on a sloping surface with the sidestand on the downhill side. The best remedy is to shorten the sidestand by cutting a small length (1 ~ 2 inches) out of the middle of the sidestand and weld the remaining two pieces together again. Perhaps best to obtain another sidestand to keep as a spare, so that if you or another owner wishes to return the bike to stock ride height a correct sidestand is available.
slmjim & Z1BEBE
A biker looks at your engine and chrome.
A Rider looks at your odometer and tags.
Ive lowered a bunch of bikes. Start with a seat if you can find something shorter. If the forks cannot be raised in the clamps you need to install a limiting spacer at the topout spring. This will put more preload on stock spring length so you may want to trim the spring. Doing that will make the spring slightly stiffer.
If the shocks are serviceable the procedure is the same. If not, buy shorter shocks but check for tire to fender clearance.
Take initial measurements (from axle to specific point on bike) and do front and rear equally. No funky geometry issues then.