Well, I tried adding the call to /etc/rc.d/rc.hotplug to /etc/rc.d/rc.K, right before the call to "telinit -t 1 1". I got a whole host of "Operation not permitted" errors, and it hung at the login screen again.
I still don't understand how runlevel 1 works. Why would /etc/rc.d/rc.K need to call telinit to change the runlevel to 1 if rc.K is called in response to the runlevel changing to 1? Or does the runlevel change to S, which I've seen all over the Internet? If so then why is rc.K set to respond to a change to runlevel 1 in /etc/inittab? SO CONFUSING.