Eli,

Took me a little bit longer to find time to do this and I now have
incorporated your feedback in the below patch. Thank you for your
perspective on prefix, that made a lot of sense and I reworked that part
of the code to be consistent with how it usually works. I was not aware
that the interactive code `p' defaults to 1 in the absence of a prefix.
I couldn't find a place where this is documented and it simplified the
code.

I updated the docstrings as you suggested and even though checkdoc
complained about the lack of a period on the first line, I figured it's
better to keep below the line length limits.

Let me know if you would like to see any other changes, I always
appreciate constructive feedback!

I am attaching the changes to:
  kmacro.texi
  kmacro.el
  kmacro-tests.el

The changelog as well as NEWS and emacs.texi remain the same from my
original message.