All words are made up. They weren’t handed down from a deity, they were made up by humans to communicate ideas to other humans.

“Kilo” can mean what we want in different contexts and it’s really no more or less correct as long as both parties understand and are consistent in their usage to each other.

If Bob says "kilobyte" to Alice, and Bob means 5432 bytes, and Alice perceives him to mean 5432 bytes, then in that context, "kilobyte" means 5432 bytes.

Exactly.

If you're talking loosely, then you can get away with it.

Man let a drug dealer give me a binary 'kilo' of some drug. That's almost a free ounce included!