First of all thanks for this great application, just what I was looking for.

Before creating my kmymoney account I had a couple loans which I am currently handling with expense categories and the monthly payments are included in my budget through the expense categories.

I would like to setup the loans properly in kmymoney to track the debit as liability accounts, but I cannot figure out how I would then include the monthly payments in my budget, from what I can work out I would only be able to include the loan interest in my budget?

At the moment, you can only include income and expense categories in a budget. So, any payment to the principal would not be in the budget.
It has been requested and we have had several talks about doing it, but our hands are full now.