That's right; as a plug-in, you run as part of the 3ds Max application itself. The input is the scene graph within 3ds Max (which has its own problems, but those problems are at least already solved :-) Writing a converter would be a lot of additional work that would not solve any of the problems I myself are facing. In fact, it would probably be just as easy, if not easier, to write a .3ds importer component for the XNA content pipeline, than to bolt it onto the kW X-port exporter.
You should know (if you don't already :-) that the .3ds format is very old, and is not at all the "preferred" format for 3ds Max files. There are many, many 3ds Max features that .3ds cannot represent well. I'm actually quite annoyed that people still seem to be exporting to .3ds when there are so many better formats around (like .X, or COLLADA).
Anyway, if you want to convert .3ds files, I suggest looking at PolyTrans, which I think you can get a free evaluation trial of for 30 days. It does a reasonable job. Other tools that might be usable can probably be found in the OpenSceneGraph code distribution, because it has import and export modules for a number of file formats. Hope this helps!